Exchange Ratio

Exchange ratio - An exchange ratio refers to the number of shares an acquiring company's shareholders will receive in exchange for one share in the acquiring company. Each exchange ratio computed would be set according to the acquirement that would be stipulated in the merger or acquisitions agreement at the time of the merger or acquisition of the two companies. The factors, which influence the exchange ratio depends upon the value of each company concerned before the closing of the merger or acquisition. The exchange ratio would also take into consideration any potential tax advantages expected for both companies and any regulations that may apply.