Technical Note | HBS Case Collection | September 2001

Technical Note on Consideration: Floors, Caps, and Collars

by Carliss Y. Baldwin

Abstract

As equity-linked consideration has become more popular in acquisition and alliances, so has the use of the "price-protection" mechanisms, known variously as floors, caps, and collars. In general, these are contractual agreements that provide insurance to the shareholders of the selling firm, the buying firm, or both.

Keywords: Risk and Uncertainty; Price; Acquisition;

Citation:

Baldwin, Carliss Y. "Technical Note on Consideration: Floors, Caps, and Collars." Harvard Business School Technical Note 902-056, September 2001.