Mergers and acquisitions (M&A)

RECENT NEWS
The Times of India  Aug 15  Comment 
Coca-Cola Co's $2.15 billion wager on a stake in Monster Beverage Corp highlights the growth-starved soft drink company's embrace of deals that fall short of a full-blown merger and acquisition but allow it to test-drive potentially risky targets.
Reuters  Aug 15  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2000 GMT on Friday:
Finance Asia  Aug 14  Comment 
Southeast Asia companies are flexing their muscle making offshore acquisitions while multi-national companies remain keen on the region, says Deutsche Bank M&A specialist.
Reuters  Aug 14  Comment 
(Adds Gazprom Neft, Royal Dutch Shell, Electrolux, ArcelorMittal, Deutsche Pfandbriefbank, Grupo Argos, Piraeus Bank, TIM Participaçoes, O2 Czech Republic)
The Economic Times  Aug 14  Comment 
According to the assurance, tax and advisory firm, the inbound deal activity has more than doubled in terms of value and volume against 2013.
USAToday.com  Aug 14  Comment 
They hire advisers and investment bankers.
FierceBiotech  Aug 13  Comment 
Merck KGaA is talking up deals again, pointing to its healthy cash reserves and saying it can well afford a blockbuster buyout to bolster its pipeline. But that's been the story for nearly a year, so what's the German giant waiting 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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