Question

Company A will merge with Company B. The pricing structure for this transaction is arranged so that each party will know with certainty the exact number of shares that will be issued in the transaction. This is known as a:

Answer 1

Answer:

Fixed Exchange Ratio

Explanation:

A fixed exchange ratio is the pre defined amount of acquirer shares for each share of target share outstanding. It is the ratio guarantees the target shareholders a certain level of ownership in the acquirer once the transaction completes. It is used in measuring the total number of shares the acquiring company has to issue for each individual share of the target firm.

Answer 2

Answer:

The correct answer is fixed exchange ratio

Explanation:

A fixed exchange ratio is one popular pricing strategy used in business takeovers or mergers where each party to the deal knows well ahead the value they would get from the business combination rather using a floating exchange ratio where the deal is structured such that the parties receives values dependent on market stock  price movements.

The fixed exchange ratio is more popular with mergers and acquisition especially in the United States of America.