In an M&A transaction, a buyer which is also a company may offer to pay by issuing its own shares to the seller, instead of paying in cash.

How is this different compared to a cash deal?

The seller is not just selling. The seller is also “buying” into the buyer.

Due diligence works both ways

The buyer would normally conduct due diligence on the seller’s company before paying for it. In a shares-for-shares deal, the seller should be doing the same on the buyer, because the seller is now relying on the buyer’s business to hold its value.

Safeguards for the seller

In a cash deal, the seller’s main concern is getting paid. In a shares deal, the seller should be asking for representations, warranties and indemnities on the buyer, similar to what the seller is expected to give on the seller’s company.

The seller should preferably get these from the shareholders of the buyer, not just the buyer itself.

Complication for the seller

If the business of the buyer turns out to be overstated, the seller cannot simply sue and recover its loss. The seller will hold shares in the buyer, which makes it harder to seek an indemnity from the buyer, or bring an action against the buyer, for a breach of the buyer’s representations or warranties.

Not really an exit

In a shares-for-shares deal, the seller has not fully cashed out and is still tied to the buyer going forward. The seller should look at the shares being offered with the same scrutiny a buyer would apply when buying the seller’s company.

This post was first posted on LinkedIn on 20 June 2026.