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Background Note
| HBS Case Collection
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2001
Technical Note on Consideration: Floors, Caps, and Collars
by
Carliss Y. Baldwin
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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.