Collar Agreement

AAA

DEFINITION of 'Collar Agreement'

An arrangement in a merger and acquisition deal that protects the buyer from significant fluctuations in the stock's price, between the time the merger begins and the time the merger is complete. Collar agreements are utilized when mergers are financed with stock rather than cash, which can be subject to significant changes in the stock's price and affect the value of the deal to the buyer and seller.

INVESTOPEDIA EXPLAINS 'Collar Agreement'

A collar establishes a range of prices within which the stock will be valued, or a range of share quantities that will be offfered to assure the buyer and seller of getting the deals they expect. It also precludes the need to negotiate the deal, once at the merger's inception and again before it closes. The primary types of collars are fixed-value collars and fixed share collars.

RELATED TERMS
  1. Covered Call

    An options strategy whereby an investor holds a long position ...
  2. Collar

    1. A protective options strategy that is implemented after a ...
  3. Interest Rate Collar

    An investment strategy that uses derivatives to hedge an investor's ...
  4. Married Put

    An option strategy whereby an investor, holding a long position ...
  5. Zero Cost Collar

    A type of positive-carry collar that secures a return through ...
  6. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
Related Articles
  1. Options & Futures

    Market Volatility Strategy: Collars

    Find out which protective or bullish collar will result in your optimal risk/return level.
  2. Options & Futures

    Using LEAPS With Collars

    This options strategy will help you lock in profit while keeping your upside potential.
  3. Options & Futures

    Don't Forget Your Protective Collar

    Guard your finances in uncertain times with a protective collar strategy, which provides short-term downside protection.
  4. Options & Futures

    Costless Collars: Because Asset Allocation Is Not Enough

    Collars are extremely flexible, and can be much more beneficial to your portfolio than asset allocation.
  5. Options & Futures

    Minimize Risk With The Long Collar

    Think your favorite stock is on the way down? This simple option-trading strategy can help you manage your risks without selling the stock.
  6. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.
  7. Investing

    WhatsApp: The Best Facebook Purchase Ever?

    WhatsApp is Facebook's largest acquisition to date. What makes it worth the major price tag?
  8. Options & Futures

    Trading Volatility? Don’t Trade Stocks, Trade Options

    During times of volatility, traders can benefit greatly from trading options rather than stocks. We explain why.
  9. Trading Strategies

    Capitalize On Collars To Enhance Your Trades

    Trade collaring measures current technicals and makes swift adjustments to account for environmental changes.
  10. Options & Futures

    Top Brokers Offering Tools For Covered Calls

    Here are the brokers that offer the best tools for investors and traders to write covered calls and covered puts.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center