The valuation of these share exchange transactions and the subsequent determination of the swap ratio are essential aspects of these transactions. Both the provisions of FEMA (to the extent that these swap agreements concern persons residing outside India) and the Companies Act of 2013 play a key role in determining the valuation of the target entity and the resulting swap rate. By law, shares or securities awarded in exchange for consideration other than cash require that consideration received against such an allowance be assessed by a registered appraiser. Similarly, FEMA rules require that the valuation of equity sweavision transactions be carried out by a banker registered with the Securities and Exchange Board of India (SEBI) or by an investment banker registered outside India. An additional layer of complexity occurs when such share exchange transactions involve a publicly traded company. In this case, the pricing guidelines prescribed by the SEBI legislation must also be respected. This usually involves a fluid situation related to the negotiated price of the issuer`s shares. Imagine that the fictional company John`s Chocolates Inc. wants to buy a rival, Andy`s Chocolate Corp. in a stock exchange.
Although there are clear advantages to structuring the AM operations by share swouillants, selling shareholders must take into account the disadvantages, particularly the fact that they do not receive consideration and liquid assets during the transaction. This is particularly important when individual promoters, as sales shareholders, are required to significantly tax the profits from the sale of their shares. The terms of the conclusion should therefore be negotiated with sufficient specificity to ensure that the interests of each party to the merger are fully taken into account. The term «share exchange» refers to the enterprise agreement in the event of a merger or acquisition, in which two companies agree to exchange assets based on shares of one entity with that of the other. It is also known as a stock exchange, stock exchange, stock-for-equity exchange. In the event of a merger or acquisition, the absorption company offers the shareholders of the target company shares of shares of a predetermined rate derived from the fair exchange report or exchange rate. Before the swap, each party must accurately evaluate its business so that a fair «swap» can be calculated. The valuation of a business is usually complex; In addition to fair value, investment value and own value should be determined.
For creditworthy companies, equity trading can be a hostile acquisition mechanism for targeted companies, which are attractive because of their expected profitability and growth prospects, but their management is not interested in expanding the business. The shareholders of these companies will be more than willing to sell their shares to the buying company on the open market.