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  • March 2009
  • Background Note
  • HBS Case Collection

Evaluating M&A Deals: Floors, Caps, and Collars

By: Carliss Y. Baldwin
  • Format:Print
  • | Pages:8
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Abstract

As equity consideration has become more popular in acquisitions, so has the use of the "pricing-protection" mechanisms, such as floors, caps, and collars. These contractual devices provide insurance to the shareholders of the target and may protect the buyer as well. The purpose of this note is to define the main categories of price protection and explain their impact on the payoffs and value of the deal to the target's shareholders.

Keywords

Mergers and Acquisitions; Equity; Price; Contracts; Business and Shareholder Relations

Citation

Baldwin, Carliss Y. "Evaluating M&A Deals: Floors, Caps, and Collars." Harvard Business School Background Note 209-138, March 2009.
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About The Author

Carliss Y. Baldwin

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More from the Author
  • Computer-Implemented Methods and Systems for Measuring, Estimating, and Managing Economic Outcomes and Technical Debt in Software Systems and Projects: US Patent 11,126,427 B2 By: Daniel J. Sturtevant, Carliss Baldwin, Alan MacCormack, Sunny Ahn and Sean Gilliland
  • Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 7 The Value Structure of Technologies, Part 2: Strategy without Numbers By: Carliss Y. Baldwin
  • Design Rules, Volume 2: How Technology Shapes Organizations: Chapter 6 The Value Structure of Technologies, Part 1: Mapping Functional Relationships By: Carliss Y. Baldwin
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