During diligence, discovering a target company underreports cash to evade taxes isn't just a financial issue to be fixed. It's a clear signal of the seller's character. If they are willing to lie to the government, they will likely lie to their business partners.

Meta structured its deal for Scale AI's team as an investment for non-voting stock, not a direct purchase. This clever approach avoided double taxation for the seller while also circumventing the HSR antitrust approval process, allowing the deal to close faster by framing it as a talent hire rather than a business combination.

An acquirer often prefers an asset purchase to avoid taking on a company's liabilities. However, a founder with a C-Corp can signal they will only accept a stock purchase agreement to gain the massive tax benefits from QSBS, creating powerful negotiating leverage.

In an acquihire, the buyer needs to interview the entire team pre-deal to justify the high valuation. However, the seller is hesitant to grant this access, as their 'crown jewel' assets—the people—could be poached if the acquirer decides not to proceed with the acquisition after meeting everyone.

Malone structured major transactions, like TCI's sale to AT&T, as pure stock swaps instead of cash acquisitions. This legally minimized the immediate tax hit for shareholders, allowing their capital to remain invested and continue compounding without a significant tax drag.

For founders considering QSBS tax benefits, which require a stock sale, the transition from asset to stock purchases in SaaS acquisitions commonly occurs around $1M ARR or a $5 million exit price. Below this threshold, the legal costs of a stock purchase often outweigh the benefits, making asset sales more common.

In an acqui-hire where a startup is failing, the acquirer gains the team for little cost. Refusing to offer a token amount of stock to the startup's original investors is a major unforced error. It saves little money but creates a powerful enemy and reputational damage within the venture community.

While it seems counterintuitive, offering all cash instead of a mix of stock and earnouts can be cheaper for the buyer. Sellers heavily discount the value of stock and view earnouts as having little to no value. A clean, all-cash offer provides certainty, which is highly attractive to sellers and can lead them to accept a lower headline price than a complex, messy deal structure.

In its acquisition of Bluejay, Mirum employed a creative deal structure combining stock and cash. The stock component ensures Bluejay's shareholders remain invested in the asset's success, while sales milestones de-risk the acquisition for Mirum and allow the selling team to share in future upside, creating a win-win partnership.