does a merger affect stock value?

Answer 1

Not technically, but people weigh in if it's a good or bad merger. Some mergers can kill both companies. They will determine how the merger works. They could be equals to form a new company (Exxon Mobile) where they trade your old stock for new stock or one comany can be disolved into a larger company in which the disolved company's stockholder are issued new stock. The people that have the stock of the larger company could see a boost in their value.

If you are talking about a merger though a buyout, then that's different and both stock would be affected.

Answer 2

Suppose there are 100000 shares for the acquirer and 50000 for the acquiree. If the value of the acquirer stock is 50 and that of the acuquiree is 25, when they merge the price of the merged entity becomes (100000x50+50000x25)/(100000+50000)= 42 which is a dilution of the shares of the acquirer.
So to avoid dilution or loss in value to the acquirer, they fix an exchange ratio say here 1:2 meaning for every 2 shares of the acquiree the acquirer decides to give 1 share of acquirer. In which case the equation above changes to(100000x50+25000x50)/(100000+25000)=50. Thus there is no dilution or loss of value for the acquirer in acquiring the acquiree. This is how the stock value is affected in mergers.
This is waht happens in stock swap acquisitions.
In cash based acquisitions cash is paid to the share holders of the acquiree by the acquirer on the value they find fit enough to give them and which they accept.
These are the two types of acquisitions where the stocks behave the way I said.
Then there is Leveraged Buy Out and hybrid acquisitions which are variants of the two theoretical mergers.

Answer 3

Yes..At the time of the merger, one company usually pays substantially more than the other is worth (to buy it) Say 20-30% based on stock price. So those shareholders get a bonus, But once the merger has happened the stockof the remaining company will drop until it Digests the higher price paid, and increases the earning of the new entity (usually by gettting rid of extra people and plants.

Answer 4

It depends if the merger is accretive or dilutie to earings of the acquirer. Accretive means it will add to earnings day one ..diltive means it will take away due to higher share count. Generally if an acquiring company aquires another who's earnins growth is slower..it will dilutive and the acquirer's share price will move lower. That is textbook....but doesnt always happen as such if there are synergies for the combined entity.

Answer 5

You also have to look at the earnings growth of the two companies...it's like getting married....if I make 100,000 a year..then i get married....my wife makes $50,000....it will be dilutive. I averaged 100,000 per year...but now that i'm married I average $75,000 per year. There are many moving parts to how a merger or acquistion will affect the acquirer's stock price.

Answer 6

The merger must be accomplished through then at which element undergo Stearns inventory will no longer exist. till then, the cost of undergo inventory ought to commerce purely below the merger value as there is continually some threat, although small, that the deal ought to fall down (yet I doubt it is going to because JP Morgan offered a collection of undergo inventory so as that they could vote it for approval of the deal).