Module V· Consideration Mix & Earn-OutsIntermediate
Question
What is a stock-for-stock merger, and how do you calculate the exchange ratio?
Answer
A stock-for-stock merger pays target shareholders with acquirer shares instead of cash. The exchange ratio tells how many acquirer shares each target share receives. Fixed exchange ratio = offer price per target share divided by acquirer share price at announcement. A floating exchange ratio adjusts shares so target holders receive a fixed value, subject to caps / collars if negotiated.