all paper deal

When one listed company bids for another company (listed or private), and offers to pay in three ways:

• all cash: the shareholders of the target company get cash for their shares
• cash and paper: the shareholders of the target company get some cash for their shares, and some of the shares in the bidding company
• all paper: the shareholders of the target company only get shares in the bidding company for their shares in the target company

Obviously, the attraction of an all paper deal to shareholders in the target company will depend on how much confidence they have in the bidding company (do they want to own its shares?) and whether they think the relative valuations of the two companies' shares are fair.

There can be some tax advantages to taking shares from a bidding company, rather than cash. The swap of shares is not deemed to be a disposal of the target company shares, so there is no immediate capital gains tax liability. If you take cash for your shares, it is a disposal, and there may be CGT to pay.