Mergers and acquisitions (M&A)

RECENT NEWS
FierceBiotech  33 min ago  Comment 
While its merger with AbbVie is looking dead, Shire is likely in line for a $1.6 billion breakup fee, cash that could fund a major M&A push. And with renowned dealmakers in its executive ranks, Shire may not be lonely for long.
Reuters  5 hrs ago  Comment 
The following bids, mergers, acquisitions and disposals were reported by 1030 GMT on Monday:
Times Online  Oct 20  Comment 
Given the market chaos erupting that day, little attention was paid last Thursday to an announcement from BASF, the German...
Financial Times  Oct 19  Comment 
A total of $573bn worth of deals have been withdrawn so far, compared with $640bn in 2008
Financial Times  Oct 17  Comment 
Bank takes top spot in equities trading with $1.8bn of revenues
SeekingAlpha  Oct 17  Comment 
By John Slater: We've previously reported that 2014 has witnessed a strong market with record valuations for many middle-market merger and acquisition transactions. This market strength has coincided with a powerful boom in public equity...
Reuters  Oct 17  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2000 GMT on Friday:
Automotive World  Oct 17  Comment 
Faurecia is sticking with its full-year targets but its CFO cautions that recent M&A activity and key model launches will likely impact performance moving forward. The post Faurecia positions for model ramp-ups, M&A impact appeared first on...




 
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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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