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forstock merger is when shareholders trade the shares of a target company for shares in the acquiring firm's company. This type of merger is cheaper and more efficient because the acquiring company does not have to raise additional capital for the transaction.
Acquiring a company comes with a cost, which is called a premium. The acquiring company pays the premium for the work that built the company from scratch. The stock prices of the acquired/target company tend to rise as they receive a premium from the acquiring company.
How to Build a Merger Model? Step 1 ? Determine the Offer Value Per Share (and Total Offer Value) Step 2 ? Structure the Purchase Consideration (i.e. Cash, Stock, or Mix) Step 3 ? Estimate the Financing Fee, Interest Expense, Number of New Share Issuances, Synergies, and Transaction Fee.
As the buyer is paying this purchase price in shares, we need to work out how many shares must be issued. This is calculated as the equity purchase price divided by the buyer's current share price.
Merger price per share means the quotient determined by dividing the Merger Price to be delivered by Newco at Closing by the total number of shares of the Company Common Stock issued and outstanding immediately prior to the Effective Time.