The greatest profit, and the greatest risk, arises from trying to identify an acquisition candidate before the announcement.

Question

Quizplus · Accepted Answer

While trying to guess an acquisition candidate before public announcement can be potentially profitable, it requires that an investor tie up large blocks of capital in betting on an event that may never come to pass. The wise investor must carefully assess the likelihood of cancellation. Special attention must be given to such factors as the possibility of antitrust action, the attitude of the target company's management toward the merger, the possibility of unhappy stockholders' suits, and the likelihood of poor earnings reports or other negative events.

The Greatest Profit, and the Greatest Risk, Arises from Trying