When a buyer acquires a company, what typically happens to the existing shareholders of the seller?

When a buyer acquires a company, it is common for the existing shareholders of the seller to receive cash for their shares as part of the acquisition process. This cash compensation is a primary form of payment in M&A transactions, providing liquidity to shareholders and allowing them to realize immediate value from their investment in the company.

In many cases, especially in the context of a straightforward acquisition, the purchasing company will pay a predetermined price for each share of the selling company's stock. This not only compensates the shareholders but also enables the new owner to take control of the selling company cleanly. The cash received can then be utilized by the shareholders for various future investments or personal financial needs.

While other options may reflect potential situations in different acquisition structures, the primary transaction mechanism in most standard acquisitions involves a cash payout to shareholders, making it the correct and most typical outcome in this scenario.