What do you mean by Takeover Premium ?
Takeover Premium is the difference between the prices paid for the target company and the target company's pre-merger value. When a company decides to acquire another company, it typically offers a price per share that is higher than the current market price. This premium serves as an incentive for the shareholders of the target company to agree to the acquisition. It compensates them for giving up their ownership stake and any potential future benefits they might have received by holding onto their shares. The acquiring company may be willing to pay a higher premium if it believes that the target company's assets, technology, or market position will provide significant strategic benefits. If multiple companies are interested in acquiring the same target, it can increase up the premium as they compete to secure the deal. Economic conditions, industry trends, and market scenario can influence the level of the premium offered.
How to Calculate Takeover Premium?
Takeover Premium calculator uses Takeover Premium = Price Paid for Target Company-Pre Merger Value of Target Company to calculate the Takeover Premium, Takeover Premium is the difference between the market value (or estimated value) of the company and the actual price to acquire it. Takeover Premium is denoted by TPM symbol.
How to calculate Takeover Premium using this online calculator? To use this online calculator for Takeover Premium, enter Price Paid for Target Company (PT) & Pre Merger Value of Target Company (VT) and hit the calculate button. Here is how the Takeover Premium calculation can be explained with given input values -> 5000 = 10000-4990.