A stock swap takes place when the shares of stock of one company are exchanged for the shares of another company usually in connection with an acquisition or merger. In most stock swaps a larger company exchanges some of its shares for 100% of the shares of a target company that is being acquired. A stock swap may also occur where the acquiring company exchanges bonds for 100% of the stock of the acquired company. Sometimes a stock swap, also known as a stock for stock transaction, may include some cash payment in addition to stock of the acquiring company.
Reasons for Mergers and Acquisitions