In
corporate finance
Corporate finance is an area of finance that deals with the sources of funding, and the capital structure of businesses, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and analy ...
, the swap ratio is an
exchange rate
In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
of the
shares
In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...
of the companies that undergo a
merger
Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
;
see
Stock swap and .
The swap ratio determines the control that each group of
shareholder
A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...
s of the companies shall have over the combined firm: essentially a function of the
relative value of the strategic and
financial result
The financial result is the difference between earnings before interest and taxes and earnings before taxes. It is determined by the earning or the loss which results from financial affairs.
Interpretation
For most industrial companies the fi ...
s of the two companies. This ratio is thus calculated as a function of the
valuation of the various assets and liabilities of the merging companies.
See also
*
Risk arbitrage
*
Stock swap
*
Junk bonds
*
Accretion (finance)
*
Contingent value rights
In corporate finance,
Contingent Value Rights (CVR) are rights granted by an acquirer to a company’s shareholders, facilitating the transaction where some uncertainty is inherent.
CVRs may be separately tradeable securities;
they are occasio ...
References
Corporate finance
Mergers and acquisitions
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