Swap Ratio


DEFINITION of 'Swap Ratio'

The ratio in which an acquiring company will offer its own shares in exchange for the target company's shares during a merger or acquisition. To calculate the swap ratio, companies analyze financial ratios such as book value, earnings per share, profits after tax and dividends paid, as well as other factors, such as the reasons for the merger or acquisition.


For example, if a company offers a swap ratio of 1:1.5, it will provide one share of its own company for every 1.5 shares of the company being acquired.

This can also be applied as a debt/equity swap, when a company wants investors to trade their bonds with the company being acquired for the acquiring company's own shares.

  1. Swap

    A derivative contract through which two parties exchange financial ...
  2. Equity

    Equity is the value of an asset less the value of all liabilities ...
  3. Equity Financing

    The act of raising money for company activities by selling common ...
  4. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  5. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, ...
  6. Debt/Equity Swap

    A transaction in which the obligations (debts) of a company or ...
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