Series 79 practice questioneasyMerger Consideration
Which of the following is typically true of a contingent value right (CVR) issued in connection with a merger?
- AGives the holder a right to receive additional consideration if specified milestones are achieved✓ Correct answer
- BIt entitles the holder to vote on the merger after closing
- CIt provides a fixed cash payment regardless of future events
- DIt automatically converts into common stock on closing
Explanation
Why A — Gives the holder a right to receive additional consideration if specified milestones are achieved
A CVR provides additional value if trigger events occur, protecting target shareholders. The trap is thinking a CVR guarantees payment or provides voting rights.
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