Series 79 practice questioneasyMerger Consideration
A floating exchange ratio in a merger agreement is designed to:
- ALock in a fixed value for target shareholders regardless of share price fluctuations
- BEnsure the acquirer pays only in cash
- CAvoid the need for regulatory approval
- DDeliver a fixed dollar value of consideration to target holders, regardless of fluctuations in acquirer stock price✓ Correct answer
Explanation
Why D — Deliver a fixed dollar value of consideration to target holders, regardless of fluctuations in acquirer stock price
A floating exchange ratio adjusts shares so target holders receive a fixed value, even as acquirer stock moves. The trap is confusing fixed and floating ratio mechanics.
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