Mergers and acquisitions (M&A)

RECENT NEWS
Wall Street Journal  Feb 27  Comment 
Pharmaceuticals deal-making is a boon for biotech stocks. Amid the euphoria, valuations call for caution.
Reuters  Feb 27  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2100 GMT on Friday:
TheStreet.com  Feb 26  Comment 
NEW YORK (The Deal) -- Freight transport providers enjoyed a solid 2014, and companies for the most part have told investors to expect more of the same in the quarters to come. Still, the gains may not come as easily as they did in the early years...
MarketWatch  Feb 26  Comment 
Gene Sykes has been promoted to co-chairman of global M&A.
Reuters  Feb 26  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2100 GMT on Thursday:
Insurance Journal  Feb 26  Comment 
Brit plc Chief Executive Officer Mark Cloutier said an excess of insurance industry capital will force more executives to sell or merge their companies. Cloutier said Brit’s planned $1.88 billion sale to Prem Watsa’s Fairfax Financial Holdings...
Reuters  Feb 25  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2100 GMT on Wednesday:




 
TOP CONTRIBUTORS

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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