Mergers and acquisitions (M&A)

The Hindu Business Line  Jul 19  Comment 
Mergers and acquisitions transactions have been excluded from the ambit of related party transactions (RPT) provision in the new company law. A clarification to this effect has now been issued by...
Clusterstock  Jul 18  Comment 
Jeremy Grantham has published his latest quarterly letter to GMO clients. In it, he continues to deliver his message of caution, warning that the stock market is expensive and is priced to deliver paltry returns for years to come. And he...
Reuters  Jul 18  Comment 
NEW YORK, July 18 (IFR) - Bankers are welcoming the heady surge in M&A activity but the bond markets are unlikely to get as big a piece of the pie as in years past, as borrowers make more use of both...
The Economic Times  Jul 18  Comment 
Value of mergers and acquisitions in India during the first half of this year increased by 30.68 per cent to USD 23 billion year-on-year, a Grant Thornton report said today.
The Hindu Business Line  Jul 18  Comment 
After several cautious years of mergers and acquisitions (M&A) and investment activity, India is poised at an important juncture and is expecting a turnaround in corporate M&A deals, as in...
Yahoo  Jul 18  Comment 
Worldwide mergers and acquisitions activity has reached $2 trillion so far this year, 75% higher than last year, according to Thomson Reuters weekly data, helped by a string of large-cap companies striking high value deals.
Automotive World  Jul 18  Comment 
Volkswagen finds itself squashing yet more takeover mergers, this time regarding Fiat. Although all the companies involved have denied the claims as speculation, many analysts are clearly preparing for additional M&A activity from the German...
WA Business News  Jul 18  Comment 
Mid-tier business broker Mergers & Acquisitions has broadened its exposure to international markets through a tie-up with European corporate advisory firm, Translink Corporate Finance.
Financial Times  Jul 17  Comment 
Cable TV group Liberty Global said it had no immediate plans to buy ITV outright but did not rule out the possibility of a future approach
Reuters  Jul 17  Comment 
German carmaker Volkswagen said on Thursday there were currently no merger and acquisition projects on its agenda.


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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