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Why is it that when a company acquires another entity in a control relationship, such that it becomes a parent to a subsidiary relationship, that there is a ‘share exchange’?
can’t the parent company literally just buy the majority of the shares from the subsidiary? why must there be an exchange?
please help me understand.There does not have to be a share exchange.
In practice it is very common for the buying company to give shares in their company as payment for the shares in the subsidiary. However that does not have to be the case, and in Paper FA usually the parent company pays cash for the shares in the subsidiary.
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