Share-for-share offer
A share-for-share offer specifies how many bidder shares target shareholders will receive for their existing shares. It preserves bidder cash but issues equity, changes ownership proportions and exposes recipients to future performance of the combined business. Evaluate the offer using the exchange ratio, bidder share value, post-transaction share count and likely synergies. The bidder's share price and transaction conditions can change, so an initial quoted value is not necessarily final or guaranteed.
Worked example
A bidder offers two new shares worth $3 each for every target share. The initial offer value is $6 per target share. If the bidder share price falls to $2.50, that quoted value falls to $5, before other transaction effects.
Common mistake
Treating an exchange ratio as a fixed cash payment or overlooking dilution of existing bidder shareholders.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |