Evaluating M&A Deals: Floors, Caps, and Collars
Posted: 21 May 2009
Date Written: March 10, 2009
Abstract
As equity consideration has become more popular in acquisitions, so has the use of the "pricing-protection" mechanisms, such as floors, caps and collars. These contractual devices provide insurance to the shareholders of the target, and may protect the buyer as well. The purpose of this note is to define the main categories of price protection, and explain their impact on the payoffs and value of the deal to the target's shareholders.
Suggested Citation: Suggested Citation
Baldwin, Carliss Y., Evaluating M&A Deals: Floors, Caps, and Collars (March 10, 2009). HBS Note No. 209-138, Harvard Business School Finance Unit, Available at SSRN: https://ssrn.com/abstract=1407524
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