How will your DCF model change if your company pays for acquisitions using cash, stock or both? The free cash flow of a company is lower if a company pays for acquisitions with cash. The free cash flow will be higher if it pays using stock. We address its question here.
At the end of the day, it does not matter if a company pays for acquisitions using cash, stock or both. The net results of the valuation will be the same.
The free cash flow of a company is lower if a company pays for acquisitions with cash. Therefore the valuation will be lower to the extent of cash flow paid out.
If a company pays for the acquisition with stock, the free cash flow will be higher but there will be a dilution of the current shareholders reducing the value of their holding by the corresponding amount. So at the end of the day, it does not matter if a company pays for acquisitions using cash, stock or both because the net results are the same.