Mergers and acquisitions (M&A)

RECENT NEWS
The Australian  3 hrs ago  Comment 
KERRY Stokes Seven West Media has confirmed the company is “actively” sizing up international acquisitions.
Reuters  Aug 25  Comment 
Japan Tobacco Inc is currently not interested in further acquisitions of vaporisers or electronic cigarette brands, its president said on Monday.
Reuters  Aug 25  Comment 
The following bids, mergers, acquisitions and disposals were reported by 2145 GMT on Monday:
Reuters  Aug 22  Comment 
* Weaker change of control covenants increase credit risks
FiercePharma  Aug 22  Comment 
Pharma M&A action so far this year has been intense--so intense that if it keeps up the pace it could match the uber years of 2008 and 2010, maybe even the record year of 2009.
Reuters  Aug 22  Comment 
(Adds Talisman, Neustar, Airbus, Apollo Global Management)
SeekingAlpha  Aug 21  Comment 
By The Gold Report: Florian Siegfried, head of precious metals and mining investments with Switzerland-based AgaNola Ltd., knows where the music is playing in the mining M&A space. In this interview with The Gold Report, Siegfried notes that...
Forbes  Aug 21  Comment 
Xamarin is a fascinating vendor. Giving mobile developers the ability to quickly and easily create applications on iOS, Android, Mac and Windows devices in a fully native manner, but from a single code base, is kind of like the holy grail for...
Financial Times  Aug 20  Comment 
The collapse of high-profile mergers and acquisitions tax inversion deals looks to be prompting legislation change, to the relief of bankers




 
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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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