From the course: Comparable Valuation Analysis

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Merger consideration

Merger consideration

From the course: Comparable Valuation Analysis

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Merger consideration

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The simplest structure is an all-cash offer. In this case, the acquirer makes a cash offer for all of the target's outstanding shares, assuming the target is a public company. To get the total consideration, we multiply the per-share cash amount by the target's share count. If the target is private, then the all-cash offer will be a lump-sum amount. an all-stock offer, then the acquirer, if public, will usually use an exchange ratio, which is the ratio of the acquirer's shares to be issued as part of the acquisition to the number of target shares to be acquired. While there are different ways to structure an exchange ratio, we will assume it is a fixed exchange ratio. We can multiply the exchange ratio by the acquirer's share price to obtain the value of the stock the target will receive. In a mixed offer, we have to account for both the cash consideration and the stock consideration. Our analysis will be set up to handle all three structures.

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