Appraisal Right

What is an 'Appraisal Right'

An appraisal right is the statutory right of a corporation's minority shareholders to have a fair stock price be determined by a judicial proceeding or independent valuator, and the obligation for the acquiring corporation to repurchase shares at that price. An appraisal right is a protection policy for shareholders, preventing corporations involved in a merger from paying less than the company is worth to the shareholders.

BREAKING DOWN 'Appraisal Right'

Multiple valuation methods are often used in determining the fair stock price and value of the acquired company, including asset-based methods, income or cash flow methods, comparable market data models, and hybrid or formula methods. While most occurrences of appraisal rights are based on consolidation or mergers, it may also apply to instances when the corporation takes any extraordinary action that shareholders deem harmful to their interests. In mergers and acquisitions, appraisal rights guarantee that shareholders are adequately compensated for being overridden in a merger or acquisition.

RELATED TERMS
  1. Qualified Appraiser

    An individual who has earned an appraisal designation from a ...
  2. Appraisal Management Company - ...

    An independent entity through which mortgage lenders order residential ...
  3. Shareholders' Agreement

    An arrangement among a company's shareholders describing how ...
  4. Appraiser

    A practitioner who has the knowledge and expertise necessary ...
  5. Working Control

    When a minority shareholder (or shareholders) has enough voting ...
  6. Appraisal Costs

    A specific category of quality control costs. Companies pay appraisal ...
Related Articles
  1. Personal Finance

    What You Should Know About Home Appraisals

    Home appraisals are an unbiased way to determine a home's value. Here is what you need to know about obtaining one.
  2. Home & Auto

    What You Should Know About Home Appraisals

    The home appraisal is a key part of any loan-closing checklist. It’s an unbiased professional opinion of a home’s value.
  3. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  4. Options & Futures

    6 Tips For Protecting Your Home's Value

    New taxes, property values, appraisals, community changes and nearby abandoned foreclosures can all lower your home's value. Take proactive steps to protect it.
  5. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  6. Options & Futures

    Mergers and Acquisitions: Doing The Deal

    Start with an Offer When the CEO and top managers of a company decide that they want to do a merger or acquisition, they start with a tender offer. The process typically begins with the acquiring ...
  7. Options & Futures

    Mergers and Acquisitions: Valuation Matters

    Investors in a company that are aiming to take over another one must determine whether the purchase will be beneficial to them. In order to do so, they must ask themselves how much the company ...
  8. Investing Basics

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  9. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  10. Professionals

    Acquire A Career In Mergers

    This exciting sector demands a lot from its advisors. Are you up for it?
RELATED FAQS
  1. How does a merger affect the shareholders?

    Explore the effect of a merger and understand how the process affects shareholders of the newly merged firm in terms of stock ... Read Answer >>
  2. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
  3. How long does it take for a merger to go through?

    Corporate mergers and acquisitions can vary considerably in the time they take to be completed. There are a number of individual ... Read Answer >>
  4. What are some characteristics of ordinary shares?

    Read about some of the primary characteristics of ordinary shares, also known as common shares, including voting rights and ... Read Answer >>
  5. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  6. In M&A how does an all-stock or all-cash deal affect the equity of the buying company? ...

    Mergers and acquisitions (M&A) are forms of corporate restructuring that are becoming increasingly popular in the modern ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center