Legal Definitions - cash-out merger

A cash-out merger is a type of merger where shareholders of the target company receive cash for their shares. This is also known as a cash merger or freeze-out merger. It is a way for the acquiring company to gain full ownership of the target company by buying out the shareholders.

For example, if Company A wants to acquire Company B, they may offer to buy all of the outstanding shares of Company B for a certain price per share. If the shareholders of Company B agree to sell their shares, they will receive cash in exchange and Company A will become the sole owner of Company B.

Cash-out mergers are often used when the acquiring company wants to take full control of the target company and does not want to share ownership with the previous shareholders. It can also be a way for the acquiring company to eliminate competition or gain access to new markets.