The synergies of a merger add so much value to the combined firm that, upon announcement of a merger, the stock prices of both the target and the acquirer increase substantially.

Question

Quizplus · Accepted Answer

While it's common for the target company's stock price to increase upon the announcement of a merger, due to the premium typically offered to shareholders, the acquirer's stock price does not always increase and can sometimes decrease. This is because the market may have concerns about the cost, integration challenges, or the strategic fit of the merger.

The Synergies of a Merger Add So Much Value to the Combined