If an acquisition does not create value, then the:
A) Earnings per share of the acquiring firm must be the same both before and after the acquisition.
B) Earnings per share can change but the stock price of the acquiring firm should remain constant.
C) Price per share of the acquiring firm should increase because of the growth of the firm.
D) Earnings per share will most likely increase while the price-earnings ratio remains constant.
E) Price-earnings ratio should remain constant regardless of any changes in the earnings per share.

Question

Quizplus · Accepted Answer

If an acquisition does not create value, the stock price of the acquiring firm should theoretically remain constant because the market perceives no increase in the firm's value. Changes in earnings per share can occur due to the financial impacts of the acquisition, but if the acquisition doesn't add value, these changes do not translate into a higher stock price.

If an Acquisition Does Not Create Value, Then The