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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Merger / Acquisition – Mechanics of Share-for-Share Exchange
Case 1:Predator MERGES with Target using a share-for-share exchange.
What happens to Target’s shares after they are bought by the predator?
– Are they dissolved and no longer exist?
– Do they become “predator” shares, i.e. does predator’s shareholding increase by target’s shares bought, and reduce by predator shares passed to target?
Case 2:Predator TAKES OVER Target using a share-for-share exchange.
Same queries as above.
The answer is the same in both cases. After the takeover the shares in the target company are cancelled and no longer exist. The original shareholders in the target company will receive either cash or shares in the acquiring company (or a combination of the two).