A "floating or flexible" share exchange ratio is used to
A) Protect the value of the transaction for the acquirer's shareholders
B) Preserve the value of the transaction for the target's shareholders
C) Minimize the number of new acquirer shares that must be issued.
D) Increase the value of the transaction for the acquiring firm
E) Increase the value of the transaction for the target firm

Question

Quizplus · Accepted Answer

A floating or flexible share exchange ratio is used to preserve the value of the transaction for the target's shareholders. In this type of exchange ratio, the number of acquirer shares offered for each target share may vary based on the market value of the acquirer's shares. This helps to ensure that the target's shareholders receive the same value regardless of fluctuations in the acquirer's share price. It does not necessarily protect the value of the transaction for the acquirer's shareholders, minimize the number of new acquirer shares issued, or increase the value of the transaction for either the acquiring or target firms.

A "Floating or Flexible" Share Exchange Ratio Is Used to