Merger consideration processing is the operational handling of what shareholders receive when their company is acquired. Once a merger completes, an exchange agent appointed by the acquirer collects the target company's shares and pays out the consideration: cash, shares of the acquirer, or a combination as in a cash-and-stock merger. Custodians capture the terms from the announcement, collect client choices by the election deadline where holders may choose between forms of payment, and instruct the depository.
After the effective date the old line is removed from client accounts and the proceeds are booked. Operations teams apply proration where one option is oversubscribed, pay cash in lieu of fractions, apply withholding tax, update cost-basis records and reconcile receipts against entitlements. Trades in the old shares that are still open are transformed into the new entitlement. The work forms part of corporate action processing, and a share-only deal is handled as a stock-for-stock merger.