Pricing Collars


Summary

This practice note discusses the use of pricing collars in public company acquisition agreements. Pricing collars are contractual provisions relating to transaction consideration that can be included in merger agreements for transactions involving a combination of two publicly listed companies where the buyer's publicly listed stock forms some or all of the purchase price. A pricing collar enables the parties to an M&A transaction to define parameters with respect to the exchange ratio between the target's and the buyer's stock in order to preserve transaction value in the event of certain fluctuations in the price of the buyer's publicly listed stock between signing and closing.