Investment Banking & M&A Structuring
M&A Floating-Value Stock Collar Exchange Ratio Formula
Calculate the floating stock exchange ratio ER = V_offer / MIN(P_cap, MAX(P_floor, P_acq)), implied target per-share payout, and pro-forma target ownership across M&A collar bands.
Protect target deal value inside the collar band while capping acquirer share dilution!
Between M&A signing and antitrust closing, acquirer stock volatility creates an asymmetric conflict: a pure Fixed Exchange Ratio exposes Target shareholders to Acquirer stock drops, whereas a pure Fixed Dollar Offer exposes the Acquirer to uncapped share dilution if its stock falls! A Floating-Value (Fixed-Dollar-Inside-Band) Stock Collar resolves both: so long as Acquirer Closing Price P_acq stays within [P_floor, P_cap], the Exchange Ratio floats as ER = V_offer / P_acq to deliver exact headline value V_offer; below P_floor, ER caps at Max_ER = V_offer / P_floor; and above P_cap, ER floors at Min_ER = V_offer / P_cap! Both boundaries compress into one formula: ER = V_offer / MIN(P_cap, MAX(P_floor, P_acq))!
Verify on Headline_Target_Offer V_offer = $60.00/sh (B2), Acquirer_Closing_Price P_acq = $100.00 (B3), Collar_Floor P_floor = $80.00 (B4 -> Max ER = 0.7500), Collar_Cap P_cap = $120.00 (B5 -> Min ER = 0.5000), Target_Shares S_tgt = 50M (B6), and Acquirer_Shares S_acq = 120M (B7): Inside the band at P_acq = $100, ER = 60 / 100 = 0.6000 shares, Implied Target Payout = 0.6000 * $100 = $60.00/sh, and Target Pro-Forma Ownership = (0.60 * 50) / (120 + 30) = 0.2000 (20.00%)! Crash P_acq to $64.00 (< $80 floor): ER caps at 0.7500 and Implied Target Payout drops to 0.7500 * $64 = $48.00/sh! Rally P_acq to $150.00 (> $120 cap): ER floors at 0.5000 and Target shares in upside at 0.5000 * $150 = $75.00/sh!
| Acquirer Price Scenario (V_offer=$60, Collar [$80, $120]) | Exchange Ratio ER | Implied Target Value / sh |
|---|---|---|
| Baseline Inside Band (P_acq = $100) | 60 / 100 = 0.6000x | $60.00 (20.00% Ownership) |
| Moderate Dip Inside Band (P_acq = $90) | 60 / 90 = 0.6667x | $60.00 (Protected Value) |
| Below Floor Crash (P_acq = $64 < $80) | Capped at 60 / 80 = 0.7500x | $48.00 (Dilution Capped) |
| Above Cap Rally (P_acq = $150 > $120) | Floored at 60 / 120 = 0.5000x | $75.00 (Upside Shared) |
Clamped Floating-Value Collar Exchange Ratio Formula
Validate V_offer > 0, P_acq > 0, and 0 < P_floor < P_cap!
=LET(v_of, B2, p_aq, B3, p_fl, B4, p_cp, B5, IF(OR(v_of <= 0, p_aq <= 0, p_fl <= 0, p_cp <= p_fl, B6 <= 0, B7 <= 0), "Invalid Collar Band", ROUND(v_of / MIN(p_cp, MAX(p_fl, p_aq)), 4)))Implied Target Deal Value & Pro-Forma Ownership Share Formula
Multiply unrounded exchange ratio by P_acq and S_tgt to avoid 4-decimal rounding drift at non-terminating prices like $90.00!
=LET(er_cl, B2 / MIN(B5, MAX(B4, B3)), IF(ISTEXT(E2), E2, ROUND((er_cl * B6) / (B7 + er_cl * B6), 4)))Try the example
Use the original values or change them to test your understanding.