The current stock price of the acquiring firm may decline,reflecting a potential dilution of its EPS or a growth in EPS of the combined firms,which is less than the growth that investors had anticipated for the acquirer as a standalone business.

Question

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When a firm acquires another firm, there is potential dilution of earnings per share (EPS) due to the issuance of new shares to finance the acquisition. This can lead to a decline in the stock price of the acquiring firm if investors believe that the growth in EPS of the combined firms will be less than what they had expected for the acquirer as a standalone business.

The Current Stock Price of the Acquiring Firm May Decline,reflecting