Purchase price and consideration
Offer, premium, mix, new shares, exchange ratio.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: purchase price and consideration.Updated 30 September 2026
Part of m&a and private equity models, with the models, labs and guides around it.
What it does
The first block of a merger model. The offer price is the unaffected price plus a premium; times the target’s diluted shares it is the equity purchase price; plus net debt it is the enterprise value the multiples are quoted on. The consideration mix then splits the price into cash and acquirer stock, and the stock portion divided by the acquirer’s price is the number of new shares.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 6–11: Share price (illustrative input), Diluted shares outstanding, Revenue, EBITDA…
- Assumptions, rows 15–20: Unaffected share price (illustrative input), Diluted shares outstanding, Revenue, EBITDA…
- Purchase Price, rows 5–10: Offer price per share, Equity purchase price, Implied enterprise value, Implied EV / target Year 1E EBITDA…
- Purchase Price, rows 13–18: Stock consideration, Cash consideration, New acquirer shares issued, Exchange ratio…
What a reviewer looks for
- New shares issued at the offer price instead of the acquirer’s price.
- Basic rather than diluted target shares.
- An exchange ratio quoted the wrong way round.
Learn it, then build it
Understand · Primer
Accretion / Dilution
Build · Lab · ~8 min
Accretion / Dilution Animator
Call a deal accretive or dilutive from P/E, premium and financing mix before you open a model.
Read · Guide · 12 min
How to Build a Merger Model: Purchase Accounting, Financing and Accretion
Read · Guide · 8 min
M&A Interview Questions: Accretion/Dilution and Beyond
Vocabulary: Merger Model, Equity Value.