Understanding share swap in stock market

Share swap means exchange of something. Accordingly, it is exchanging one set of shares with another set of shares. Term share swap is often used during a merger or acquisition of a company when acquiring company uses its own stock as cash to purchase the business. Each shareholder of the acquired company receives a pre-determined amount of shares from the acquiring company. Before the swap occurs each party must accurately value its company so that a fair swap ratio can be calculated.