During which market condition might an acquirer prefer to use cash instead of stock for financing?

An acquirer may prefer to use cash instead of stock for financing when share price volatility is high. This preference arises from several considerations related to the uncertainties that market volatility introduces.

When a company’s share price is highly volatile, it can be challenging to determine the fair market value of the offering. If the acquirer uses stock as a form of payment, the fluctuating share price could result in the acquirer paying more or less than intended based on price swings. This uncertainty may cause issues in negotiations and can lead to disagreements about the value exchanged between the acquirer and the target.

By opting for cash, the acquirer can offer a more straightforward and stable form of consideration, eliminating the risk associated with price volatility. This approach allows the acquirer to maintain better control over the transaction's value and reduces the potential for future disputes regarding the value of the shares exchanged. Overall, cash deals provide clarity and can create a smoother transaction process in turbulent market conditions.