What usually happens to a company's stock when it merges with another company? Does it rise/fall in value...?

Answer 1

Companies will usually only buy another company when they feel it adds value. They may feel that they can fix problems at the company that they are buying or that there are synergies between the companies that make the combined company worth more than the value of the separate companies. The question is -- who gets that extra value.

Prior to the William's Act (1968) a corporation only needed to give three days notice to buy a firm. They often announced the deal on Friday and closed it on Monday -- giving the target no time to respond. The company would make an offer for 51% of the firm. Shareholders of the target who tendered their shares immediately would make a small profit over where the shares were trading. Those who did not tender right away would often get stuck with something that was worth about what they had before. Almost all of the surplus value would go to the shareholders of the acquiring firm.

The Williams Act gave the target firm 30 days to respond. This gave them time to fight it or to bring in other bidders. On average, the net result is as follows:

1. If no other bidders come in, then the merger goes through and the excess value is shared between the target and the acquiring firms. Everyone makes out.

2. If other bidders are brought in, then the excess value gets auctioned off to the highest bidder. This means that almost all of the extra value goes to the shareholders of the firm being bought. The winning firm usually sees its stock price go down. The firm that loses out usually makes a small profit on the shares that they had already bought. It usually sees a small bump in price when they lose the deal.

3. If the target decides to fight the buyout and wins -- then they usually take a real hit in their stock price. The losing firm sells off the shares they nought at a slight profit (they usually agree to give up their bid in exchange for a good price on the stock -- this is called Greenmail).

Answer 2

It depends on how the investors see the merger benefiting the company. I have seen both up and down. Most times it may take a slow trend up until the merger

Answer 3

When a company merges with another co. your stock will double in shares, but the price drops.

Answer 4

often while one business enterprise combines with yet another one business enterprise is seen to get carry of the different business enterprise. The finding out to purchase business enterprise has to recover from 50% of the shares of the aquired business enterprise. to try this, the finding out to purchase business enterprise ought to grant some thing to the shareholders of the gained business enterprise. What they grant is often shares of the finding out to purchase business enterprise, money, or a mix of money and shares. as a manner to shareholders of the gained business enterprise to agree, the grant must be worth better than the present cost of the inventory. as an occasion, if the shares are finding out to purchase and advertising at $20 consistent with proportion, the grant may be $26 consistent with proportion, the grant may be $27 worth of inventory interior the finding out to purchase business enterprise, or the grant may be for $15 in money and $11.50 worth of inventory interior the finding out to purchase business enterprise. through fact the finding out to purchase business enterprise had to pay better than industry cost for the business enterprise it gained, that's no longer uncommon to work out the cost of the shares interior the finding out to purchase business enterprise drop modestly in cost, in spite of the reality that that's on no account actual continuously. If the mix of the two agencies is estimated to be incredibly basic, and the financial equipment of scale is estimated to create greater reductions than the acquisition value, it relatively is possibly that the cost of the shares of the finding out to purchase business enterprise will bypass up besides.