The Acquisition Premium Calculator helps users determine the premium paid over the market price during an acquisition. This tool is invaluable for financial analysts, investors, and business leaders who need to assess the fairness and financial implications of an acquisition offer. By inputting the acquisition price and the market price of the target company's shares, the calculator provides the acquisition premium as a percentage, offering clear insights into the deal's attractiveness.
Acquisition Premium Calculation Formula
To calculate the acquisition premium, you can use the following formula:
Acquisition Premium = ((Acquisition Price - Market Price) / Market Price) * 100
Steps for Calculation:
- Determine the Acquisition Price (Pa):
- This is the price per share that the acquiring company offers to pay for the target company's shares.
- Determine the Market Price (Pm):
- This is the current trading price per share of the target company before the acquisition announcement.
- Calculate the Difference:
- Subtract the Market Price from the Acquisition Price: Pa - Pm.
- Divide by the Market Price:
- Divide the difference by the Market Price: (Pa - Pm) / Pm.
- Convert to Percentage:
- Multiply the result by 100 to get the Acquisition Premium as a percentage: ((Pa - Pm) / Pm) * 100.
Conversion Table for Common Calculations
| Acquisition Price (Pa) | Market Price (Pm) | Acquisition Premium (%) |
|---|---|---|
| $50 | $40 | 25% |
| $100 | $80 | 25% |
| $120 | $100 | 20% |
| $150 | $100 | 50% |
| $200 | $150 | 33.33% |
Example of Acquisition Premium Calculator
Scenario: Calculating the acquisition premium for a company with a market price of $60 per share and an acquisition price of $75 per share.
- Market Price (Pm): $60
- Acquisition Price (Pa): $75
- Calculation:
- Difference: $75 - $60 = $15
- Division by Market Price: $15 / $60 = 0.25
- Conversion to Percentage: 0.25 * 100 = 25%
So, the acquisition premium is 25%.
Most Common FAQs
The acquisition premium is the extra amount an acquiring company pays over the market price to purchase a target company. It is important because it reflects the value the acquiring company sees in the target company beyond its current market value.
Input the acquisition price and market price of the target company's shares into the calculator. It will automatically compute the acquisition premium as a percentage.
Yes, the calculator works for any currency as long as the acquisition price and market price are in the same currency.