Exchange Ratio Template

In mergers and acquisitions (M&A), the share exchange ratio measures the number of shares the acquiring company has to issue for each individual share of the target firm. For M&A deals that includes shares as part of the consideration (compensation) for the deal, the share exchange ratio is an important metric. Deals can be all cash, all shares, or a mix of the two.

The formula for calculating exchange ratio is:

Exchange Ratio = Offer Price for the Target’s Shares / Acquirer’s Share Price

Importance of the Exchange Ratio

In the event of an all-cash merger transaction, the exchange ratio is not a useful metric. In fact, in this situation, it would be fine to exclude the ratio from the analysis. Often times, M&A valuation models will note the ratio as “0.000” or blank, when it comes to a full cash transaction. Alternatively, the model may display a theoretical exchange ratio, if the same value of the cash transaction were instead to be carried out by a stock transaction.

More Free Templates

For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentation and Word document templates.

• Excel Modeling Templates
• PowerPoint Presentation Templates
• Transaction Document Templates