Collar Agreement
A collar agreement establishes a price range within which the price of an asset can fluctuate, commonly used in mergers and acquisitions (M&A) to mitigate risks associated with stock price volatility. This agreement ensures that the final price paid in a transaction is within an acceptable range, protecting both buyers and sellers from significant price swings. Collar agreements are especially useful in deals involving stock-based payments.
Key Takeaways
- Sets price limits for managing volatility in transactions.
- Common in M&A to mitigate stock price risk.
- Protects buyers and sellers from extreme price fluctuations.
- Often used in stock-based acquisition deals.
