BREAKINGVIEWS-Cash-and-stock mixers sweeten M&A spirits

By Jeffrey Goldfarb

NEW YORK, Feb 24 (Reuters Breakingviews) - Sometimes mergers benefit from a little extra mixing and matching. As buyers seek to negotiate past stubborn valuation gaps, more of them are using a combination of cash and stock, rather than one or the other alone, to pay for deals. Banco Santander SAN.MC and Boston Scientific BSX.N are among those indulging in currency fusion to help power an M&A boom.

Cash remains king, but its reign is less dominant. Money alone accounted for half of last year’s $2.2 trillion in U.S. deal activity after peaking at nearly two-thirds in 2022, according to LSEG data. Acquisitions using only equity also slipped, representing just 8% of volume compared to a quarter a few years ago. The proportion using a blend of the two, however, reached 25%, its highest proportion in a decade and covering a runaway record $550 billion of transactions.

All sorts of idiosyncratic factors can influence the method of payment. Biotechnology deals, which are on the rise, often use an equity component to share the risk of unproven therapies and preserve cash to cover research costs. Falling interest rates, meanwhile, encourage CEOs to borrow for empire expansion. This latest uptick in M&A, however, has largely hinged on untethering would-be sellers from post-pandemic valuation peaks.

After all, valuations are now meaningfully lower. In consumer goods, for example, the typical corporate buyer paid 10 times EBITDA last year, one-third less than five years ago, while in technology the median multiple was 16 times in 2025 versus almost 22 times in 2021, consultancy Bain found. Paying in cash helps to realize some of that discount while an equity sweetener gives sellers an opportunity to benefit from any eventual reflation.

Kenvue KVUE.N Chair Larry Merlo typifies the welcome response to hybrid compensation, which features prominently in his company’s agreed $49 billion sale to Kimberly-Clark KMB.O. The board in December hailed immediate value provided by the cash component while a fixed-ratio equity swap also enables stockholders of the Tylenol and Listerine maker to share almost equally in the upside from cost savings anticipated in the merger.

Buyers and sellers will struggle to get much closer to finding common ground on prices. Artificial intelligence developments are again throwing valuations into disarray while the U.S. Federal Reserve will be under new leadership soon, with its policy direction unclear. As dealmakers seek to sustain the M&A momentum, they’ll probably keep merging cash and stock, too.

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