![]() a price above the current market price) to acquire the company. The rationale here is clear: buyers are invariably forced to pay a premium (i.e. Target company stock’s reaction to a bidĪs a rule, acquisitions tend to drive up the value of a target company’s stock. The stock price, meanwhile, spiked 4% on April 17th, as opportunistic traders bought up the shares in the hope that an acquisition might come to pass. This only came to light when it emerged that Nokia had hired investment bankers to ward off the interest. ![]() When rumors abound that Nokia was the subject of acquisition interest from various parties. whether it might even trigger a bigger offer from a third party.Ī good example of this can be seen in Nokia’s stock price in April 2020.whether the target company is friendly or hostile to the takeover.The mere mention that a company has become a target for an acquisition is usually enough to generate volatility in the stock price of both the buyer and the seller, as traders and analysts try to establish: How company stocks move during an acquisition 1. There is a rich and varied academic literature on the relationship that exists between M&A and stock prices.įor decades, academics and traders alike have tried to pin down how mergers and acquisitions affect stock price over the short and long term, and whether the process adds value for those on the buying and selling side.ĭealRoom help many companies organizing M&A process and below, we look at some of the main ways in which M&A transactions are said to affect stock prices.
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