Exchange Ratio

The exchange ratio is the number of shares of one company that are exchanged for each share of another company in a merger or acquisition. The exchange ratio is determined by the relative values of the two companies' stock prices.

The exchange ratio is an important factor in determining the value of a merger or acquisition. If the exchange ratio is too high, the acquiring company will overpay for the target company. If the exchange ratio is too low, the target company's shareholders will not receive a fair price for their shares.

The exchange ratio is also used to calculate the value of a stock option in a merger or acquisition. If a stock option is granted before a merger or acquisition, the exchange ratio will be used to determine the number of shares of the acquiring company that the option holder will receive.

The exchange ratio is a complex financial concept that can have a significant impact on the value of a merger or acquisition. It is important to understand the exchange ratio before making any investment decisions.