![]() " Compaq Computer Corporation, Form Q-10, For the Quarterly Period Ended September 30, 1999,". " Done Deal? Why Many Large Transactions Fail to Cross the Finish Line." " Daimler Embarks on a New Era as Mercedes-Benz Group." ![]() " How Companies Use Their Cash: Mergers and Acquisitions." Shareholders of the acquiring company experience a marginal loss of voting power, while shareholders of a smaller target company may see a significant erosion of their voting powers in the relatively larger pool of stakeholders.įinancial Industry Regulatory Authority. This phenomenon is prominent in stock-for-stock mergers, when the new company offers its shares in exchange for shares in the target company, at an agreed-upon conversion rate. Note that the shareholders of both companies may experience a dilution of voting power due to the increased number of shares released during the merger process. In the absence of unfavorable economic conditions, shareholders of the merged company usually experience favorable long-term performance and dividends. This is often due to the fact that the acquiring firm will need to spend capital to acquire the target firm at a premium to the pre-takeover share prices.Īfter a merger or acquisition officially takes effect, the stock price usually exceeds the value of each underlying company during its pre-takeover stage. At the same time, shares in the target firm typically experience a rise in value. Generally speaking, in the days leading up to a merger or acquisition, shareholders of the acquiring firm will see a temporary drop in share value.
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