Mergers and acquisitions (M&A)

RECENT NEWS
Reuters  3 hrs ago  Comment 
The following bids, mergers, acquisitions and disposals were reported by 1000 GMT on Wednesday:
FiercePharma  Jun 28  Comment 
Horizon said to explore stake sale as it scouts for M&A chelfand Tue, 06/28/2016 - 10:35
Wall Street Journal  Jun 27  Comment 
Ride-hailing startup Lyft has hired Qatalyst Partners, the boutique investment bank best known for helping tech companies find a buyer, according to people familiar with the matter.
Forbes  Jun 27  Comment 
Even before the monumental Brexit vote last Thursday, the result of which wrought carnage to the markets and sent shockwaves through the deal making fraternity, data for UK-targeted only M&A in the second quarter of 2016 was shown to have...
The Hindu Business Line  Jun 27  Comment 
But the move poses regulatory challenges for pharma sector, says Kiran Mazumdar-Shaw
The Economic Times  Jun 27  Comment 
Renewable energy has steadily gained prominence owing to low availability of domestic fuel and increased volatility in international coal prices.
Forbes  Jun 26  Comment 
Pundits have commented about how Brexit might affect the universe. However, Brexit might present a generational opportunity to acquire UK-based businesses on very favorable terms.
Forbes  Jun 24  Comment 
In the immediate aftermath of the EU Referendum vote, UK Prime Minister David Cameron announced his resignation and there’s turmoil in the global markets. The Sterling slid by the most on record and European stocks headed for the biggest drop...
Reuters  Jun 24  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2000 GMT on Friday:
Insurance Journal  Jun 24  Comment 
Environmental Risk Managers, Inc. (ERMI) has announced a new product to address exposures related to business & property transactions. The Mergers, Acquisitions, and Pollution Protection (MAPP) product combines representations & warranties (R&W)...




 
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How Stocks react to M&A

When companies announce that they are going to be buying other companies, the stock prices of both institutions react. However, they don't usually react the same way. One stock price typically goes up while the other stock price typically goes down.

The Price of One Stock Goes Up

The stock that usually benefits the most from a merger or an acquisition is the stock of the company that is being acquired. In most cases, the stock price of the company that is being acquired goes up.

The reason the stock price of the company being acquired typically goes up is the company that is doing the acquiring usually pays a premium for the stock of the company it is acquiring. For instance, when Pfizer announced it was going to acquire Wyeth, the price of Wyeth stock jumped higher.

The Price of the Other Stock Goes Down

The stock that usually benefits the least—at least in the short term—from a merger or an acquisition is the stock of the company that is doing the acquiring. In most cases, the stock price of the company doing the acquiring goes down.

The reason the stock price of the company doing the acquiring typically goes down is the company is taking on increased risk by acquiring the new company. Companies involved in mergers and acquisitions like to talk about the "synergies" the combination of the two companies will create, but there are no guarantees combining two companies will result in improved performance and profits

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