The swap ratio calculates how many shares the acquiring company needs to issue for each share held by the investor in the target company in order to provide the investor with the same relative value.
The purchase price of the target company often includes a price premium paid by the buyer in connection with the acquisition of 100% control of the target company.
When calculating the exchange ratio, the intrinsic value of the shares and the underlying value of the company are taken into account.
There are two types of exchange ratios: fixed exchange ratio and floating exchange ratio.