Recording Mergers and Acquisitions

Mergers and acquisitions are 2 similar mechanisms that companies can use to combine their operations.

• Merger - 2 companies agree to combine their operations into a single company. Although mergers occur among “equals”, the name and stock of one of the merged companies are typically retained for the new combined company. The stock holders of the other company receive compensation for their shares, usually in the form of shares of the new company. For example, as a share holder of the other company, you might receive 1 share in the new company for every 3 shares in the old company you own.
• Acquisition - Also known as a buyout. One company will purchase all of the shares of another company. The payment can be in the form of cash, or in shares of the purchasing company.

How to Record a Merger

To record this event in StockMarketEye, create the following 2 transactions:

1. For your holdings in AAAA, create a “S
   1. Select the AAAA holding and then click on the “Sell” button in the toolbar.
   2. In the new “Sale Details” window, change the Type field to be “Shares Out”. 
   3. Set the Shares field to be the total number of shares in AAAA that you currently own.
   4. Set the Price field to be the price of your original unit costs (i.e. cost basis per share). No commissions or fees are needed for this transaction.
   5. In general, the Net Total value of this “Shares Out” transaction should be the same as your cost basis of the AAAA holding.
   6. Note that you should also uncheck the “Update the Cash balance” option.
   7. The date of the transaction should be the date when the shares stopped trading.

   8. Click "Add" to enter this transaction.

      

      
      
2. For the new holdings in XYZ, add a “
   1. Click on the “Buy” button in the toolbar.
   2. In the new “Purchase Details” window, change the Type field to be “Shares In”.
   3. Set the Shares field to be the number of shares in XYZ that you will receive. That is, your number of shares in AAAA times the merger ratio. In our example, this is 0.5 times the number of AAAA shares we owned.
   4. Set the Price field to be the price of your original unit costs, adjusted for the merger ratio. That is, your original cost basis per share of AAAA times the merger ratio. No commissions or fees are needed for this transaction.
   5. In general, the total value of this “Shares In” transaction should be the same as your costs basis for the original AAAA holdings.
   6. Note that you should also uncheck the “Update the Cash balance” option.
   7. The date of the transaction should be the date when the shares stopped trading.

   8. Click "Add" to enter this transaction.

      

After applying these 2 transactions, you should only have holdings in your Prices view for XYZ. The cost basis of the XYZ shares should also correspond to the combined cost basis of all your XYZ shares.