What is the average market reaction to a takeover announcement?
A)The price of the target increases by 15%,while the price of the acquirer decreases by 1%.
B)The price of the target increases by 15%,while the price of the acquirer increases by 1%.
C)The price of the target and acquirer both increase by 15%.
D)The price of the target increases by 1%,while the price of the acquirer increases by 15%.

Question

Quizplus · Accepted Answer

The average market reaction to a takeover announcement is for the price of the target company to increase by a significant amount, usually around 15%. The price of the acquiring company also tends to increase, but by a smaller amount, usually around 1%. This is because investors are generally optimistic about the potential benefits of the merger or acquisition for the target company, but are more cautious about the impact on the acquiring company. Option A, C and D are incorrect as they give different price movements.

What Is the Average Market Reaction to a Takeover Announcement