Mergers and acquisitions (M&A)

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Reuters  Sep 22  Comment 
(Adds Silver Lake, EEX, Exxon, Santander, Sun Resorts, Otter Media and Rexel; updates Total and Auxilium)
TechCrunch  Sep 20  Comment 
 2014 has seen an unprecedented number of M&A transactions globally, especially within the tech sector. Global tech M&A was up 55% over last year, soaring to its highest level since 2000. Technology related transactions this year alone have...
Bloomberg  Sep 19  Comment 
One way for Total SA to pay for a promised boost in energy production would be to spin off its gas-station business.
DailyFinance  Sep 18  Comment 
BOULDER, CO -- (Marketwired) -- 09/18/14 -- Surna Inc. (OTCQB: SRNA), a company that develops, acquires, produces and sells equipment for the legal marijuana industry with a focus on disruptive technology, today announced it has recently engaged...
The Economic Times  Sep 18  Comment 
According to assurance, tax and advisory firm Grant Thornton, the overall deal sentiment in India has remained consistently high from second quarter of 2014.




 
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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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