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In case of a merger, how can the acquirer company determine the ratio (method of computing) in which it plans to allot shares to acquiree company?
I am curious about how companies determine the ratio in which they allot shares to acquiree companies during a merger. Can you explain the method of computing for this process?
Sure! The most common method of computing the ratio is by using the market value of the acquirer and acquiree companies' stock. This is called a market capitalization ratio. The ratio is calculated by dividing the market value of the acquirer's outstanding shares by the market value of the acquiree company's outstanding shares.