The Effective Time or date, is the time at which the merger is officially consummated. In other words completed, as far as investments are concerned. As the necessary documents are filed, the merger or acquisition is considered official. After this point, an investor who has held stock in the target can expect to receive payment for their shares.
This date and time is variable and its timing is dependent on many factors such as regulatory authorization and shareholder acceptance and other customary closing conditions. This date should not be confused with the expected completion date which is usually given as an estimate by the companies, the outside date or the forecast completion date as estimated by the trader. It is through analysis and understanding of the M&A process however that the trader attempts to forecast a completion date which is identical to the effective date.
An Example Use of Effective Time
In the PRER14A filing made by Tallgrass Energy (TGE) on the February 11, 2020 the definition of Effective Time on page 2 is given as,
The Merger
Pursuant to the Agreement and Plan of Merger, dated as of December 16, 2019 (the “Merger Agreement”), by and among TGE, TGE GP, Buyer and Buyer Sub, Buyer will merge with and into TGE (the “Merger”), with TGE surviving the Merger and continuing to exist as a Delaware limited partnership. The Merger will become effective upon the filing of a properly executed certificate of merger with the Secretary of State of the State of Delaware or at such later date and time as may be agreed to by the parties to the Merger Agreement and expressed in the certificate of merger as the effective date and time of the Merger (the “Effective Time”). Through the Merger, the Sponsors and the limited partners of Buyer immediately prior to the Effective Time will become the owners of all of the outstanding Class A shares.
