We examine how stock liquidity affects acquisitions. Relying on a simple model, we hypothesize that liquidity enhances acquirer stock as acquisition currency, especially when target is less liquid. As hypothesized, we find greater acquirer (lower target) liquidity increases acquisition likelihood and payment with stock, reduces acquisition premiums, and improves acquirer announcement returns in equity deals. To exploit the benefits of liquidity, firms take steps to improve stock liquidity prior to stock-acquisitions. Our identification strategy relies primarily on exogenous variation in stock liquidity induced by changes in composition of Russell-1000/2000 indices. The liquidity shock induced by stock-market decimalization yields similar results.