M&A Boot Camp booklet 2023 - Flipbook - Page 47
Assumed Facts
– Assumed Facts:
– Acquirer Corporation ("ACo"), a publicly held company, is to acquire the business of Target
Corporation ("TCo") by means of a "stock-for-stock" merger in which TCo will be merged into
ACo. ACo will be the surviving corporation in the merger, and all of the outstanding TCo stock will
be converted into shares of ACo stock pursuant to the merger.
– TCo has 10,000,000 shares of common stock (and no other equity securities) outstanding.
– Consider the following hypothetical scenario:
– Shortly before the execution of the definitive merger agreement:
– ACo shares are trading at a price of $15 per share; and
– The parties have determined that the (equity) value of TCo is $300,000,000, or $30 per share
of TCo stock (i.e., 2 times the trading price of a share of ACo stock).
– What are some of the pricing formulations the parties might consider?
As used in the accompanying materials, the term "Closing ACo Stock Price" refers to the market price of a share of ACo stock at the
time the merger is consummated. (Note that, in some transactions, this is expressed as an average price over a specified period—e.g.,
"the average closing price of a share of ACo stock as reported on the New York Stock Exchange over the 20 trading days immediately
preceding the date on which the merger becomes effective.")
Note: Some figures in the accompanying materials have been rounded.
Pricing Formulations in “Stock-For-Stock” Mergers — Page 1