Exchange Ratio Calculator (M&A Stock-for-Stock Deals)

M&A • Equity • Deal Structuring

Model fixed and floating exchange ratios, implied offer price, premium, and post-deal ownership for stock-for-stock mergers and acquisitions. Includes collar and sensitivity analysis.

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Use basic or fully diluted shares, consistent with your model.

Fixed Exchange Ratio

In a fixed exchange ratio deal, the number of acquirer shares per target share is locked at signing. The dollar value per target share will float with the acquirer’s share price.

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Optional. If left blank, you can input the exchange ratio directly.

If you enter both offer price and ratio, the ratio will be recalculated from prices.

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Use this to see how the implied offer value changes by closing.

Results

Exchange Ratio & Offer

Exchange ratio
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Implied offer price at signing
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Premium vs. standalone (%)
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Implied offer price at closing
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Ownership & Dilution

New shares issued to target
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Pro forma shares outstanding
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Target ownership %
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Acquirer ownership %
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Sensitivity: Implied Offer vs. Acquirer Share Price

Quick view of how the implied offer price per target share changes as the acquirer’s share price moves, holding the exchange ratio structure constant.

Acquirer Price Implied Offer / Target Share Premium vs. Standalone

What is an exchange ratio in M&A?

In a stock-for-stock merger or acquisition, the exchange ratio tells you how many shares of the acquirer each target share will receive. For example, an exchange ratio of 0.50 means each target share is exchanged for 0.5 shares of the acquirer.

The exchange ratio drives the implied offer price, the premium to the target’s standalone price, and the post-deal ownership split between acquirer and target shareholders.

Key formulas used in this calculator

1. Fixed exchange ratio

Exchange ratio (fixed):

$$ \text{ER}_{\text{fixed}} = \frac{\text{Offer Price per Target Share at Signing}}{\text{Acquirer Share Price at Signing}} $$

Implied offer price at signing:

$$ \text{Offer}_{\text{signing}} = \text{ER}_{\text{fixed}} \times \text{Acquirer Price}_{\text{signing}} $$

Implied offer price at closing:

$$ \text{Offer}_{\text{closing}} = \text{ER}_{\text{fixed}} \times \text{Acquirer Price}_{\text{closing}} $$

In a pure fixed exchange ratio deal, the ratio is locked. If the acquirer’s share price falls, the dollar value per target share falls as well.

2. Floating exchange ratio (fixed value)

Exchange ratio (floating):

$$ \text{ER}_{\text{floating}} = \frac{\text{Fixed Dollar Consideration per Target Share}}{\text{Acquirer Share Price at Closing}} $$

Implied offer price at closing:

$$ \text{Offer}_{\text{closing}} = \text{Fixed Dollar Consideration per Target Share} $$

Here, the dollar value is fixed. If the acquirer’s share price falls, the target receives more shares; if it rises, the target receives fewer shares.

3. Collar structure (simple price band)

Effective acquirer price used in ratio:

$$ P_{\text{eff}} = \min\left( \max\left(P_{\text{closing}}, P_{\text{floor}}\right), P_{\text{cap}} \right) $$

Exchange ratio with collar:

$$ \text{ER}_{\text{collar}} = \frac{\text{Fixed Dollar Consideration per Target Share}}{P_{\text{eff}}} $$

Within the collar band, the deal behaves like a floating exchange ratio. Outside the band, the effective price is capped or floored, which makes the exchange ratio behave more like fixed.

4. Premium and ownership

Premium vs. standalone price:

$$ \text{Premium} = \frac{\text{Offer Price} - \text{Standalone Target Price}}{\text{Standalone Target Price}} $$

New shares issued to target:

$$ \text{New Shares} = \text{ER} \times \text{Target Shares Outstanding} $$

Pro forma shares outstanding:

$$ \text{Pro Forma Shares} = \text{Acquirer Shares} + \text{New Shares} $$

Target ownership %:

$$ \%_{\text{Target}} = \frac{\text{New Shares}}{\text{Pro Forma Shares}} $$

Acquirer ownership %:

$$ \%_{\text{Acquirer}} = 1 - \%_{\text{Target}} $$

How to use the Exchange Ratio Calculator

  1. Enter market data. Input the acquirer and target share prices at signing, plus each company’s basic or fully diluted share count.
  2. Choose a structure. Use the tabs to select:
    • Fixed – lock the exchange ratio at signing.
    • Floating – lock the dollar value per target share.
    • Collar – protect both sides with a price band.
  3. Set the economics.
    • For Fixed, enter the target offer price at signing (or directly enter an exchange ratio).
    • For Floating, enter the fixed dollar value per target share and a closing price scenario.
    • For Collar, set the fixed value plus lower and upper bounds for the acquirer’s share price.
  4. Click “Calculate”. The tool computes the exchange ratio, implied offer price, premium, and post-deal ownership split.
  5. Review sensitivity. Use the sensitivity table to see how the implied offer changes as the acquirer’s share price moves.

Fixed vs. floating exchange ratios: when to use which?

Fixed exchange ratio – target shares price risk

  • Target shareholders bear more risk from acquirer share price moves.
  • Acquirer knows exactly how many shares it will issue (dilution is predictable).
  • Common when the acquirer is significantly larger and more liquid than the target.

Floating exchange ratio – acquirer shares risk

  • Target shareholders are protected on value; they receive a fixed dollar amount.
  • Acquirer bears more risk on share price moves and potential dilution.
  • Common when the target has strong bargaining power or when market volatility is high.

Collars – sharing the risk

Collars are often used to share price risk between acquirer and target. Within a band, the deal behaves like floating (protecting value). Outside the band, the deal behaves more like fixed (limiting dilution or value leakage).

Limitations and practical notes

  • This calculator focuses on stock-for-stock consideration and does not model cash components or earn-outs.
  • Use consistent share counts (basic vs. fully diluted) for both acquirer and target.
  • In real transactions, legal documentation may define more complex collars, caps, and walk-away rights than the simplified structure here.
  • Always combine exchange ratio analysis with a full accretion/dilution and valuation model.

Exchange Ratio FAQ

What is an exchange ratio in M&A?

It is the number of acquirer shares that each target share receives in a stock-for-stock merger or acquisition. For example, an exchange ratio of 0.80 means each target share is exchanged for 0.8 shares of the acquirer.

How do I choose the “right” exchange ratio?

Bankers usually start from valuation work (DCF, trading comps, deal comps) to determine a reasonable offer premium range. They then back into an exchange ratio that delivers that premium at signing, while checking dilution, EPS accretion, and ownership split.

Why do some deals use collars?

Collars reduce the risk that large share price moves between signing and closing make the deal unattractive for one side. They are especially common in volatile markets or when there is a long gap between signing and closing due to regulatory approvals.

Does this calculator handle cash-and-stock deals?

Not explicitly. You can still use it for the stock component by entering the stock portion of the value as the fixed dollar amount, but a full cash-and-stock structure requires a more detailed M&A model.

Is this tool suitable for legal or tax advice?

No. This calculator is for educational and analytical purposes only. Always consult qualified legal, tax, and financial advisors before structuring or agreeing to any transaction.