What the spread is

The spread is the offer price minus the current price. If the deal closes on the stated terms, a holder collects it. If the deal is blocked by regulators, voted down or abandoned, the stock usually falls back toward where it might trade without the offer, and that loss is usually much larger than the spread. The calculator puts both sides next to each other.

How the implied chance is worked out

If the price today sits between the fallback and the offer, you can ask what probability of closing would make the stock fairly priced: the chance p where p times the offer plus (1 - p) times the fallback equals today's price. Rearranged, p is (price - fallback) divided by (offer - fallback). It ignores time value, dividends and the chance of a higher bid, and it is only as good as your fallback estimate, which is the hardest number to get right.

The annualized figure scales the spread by the time to close. Deals that take longer than expected earn less per year even when they close, so it is worth running the sheet again with a later close date.

For the mechanics of review and why spreads widen or narrow, see how merger reviews move a target's share price. Trading halts around deal news are covered in what happens when a stock is halted.