hard · Investment Banking
A buyer is evaluating a target using a fixed exchange ratio stock-for-stock structure.
If the buyer's share price drops by 10% before the deal closes, what happens to the value received by the target's shareholders?
- The buyer must pay the 10% difference in cash as a 'top-up' payment.
- The exchange ratio increases automatically to compensate for the price drop.
- The value received by the target shareholders decreases by 10%.
- The value remains the same because the exchange ratio is fixed.
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