FIXED DOLLAR VALUE COLLAR

A floor and cap on the stock component of an acquisition transaction, within which the purchasing company agrees to deliver a fixed dollar value of its stock for each share of the target company. In a fixed dollar value collar, the exchange ratio i.e., the ratio at which the target company exchanges its shares for those of the acquiring company, will fluctuate within the collar, while the floor and cap fix minimum and maximum levels for the exchange ratio.

The fixed dollar value collar is one of two types of collars used in M&A transactions, and is geared toward protecting the seller or target company's interests. This is because it delivers a constant dollar value for each of the seller's shares even if the acquirer's stock price plunges. The other type of collar, the fixed number of shares collar, is more beneficial to the buyer or acquirer because it limits share dilution.

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