M&A
MarketsDefinition
Mergers and acquisitions. The buying, selling, dividing, and combining of companies. Friendly deals are negotiated; hostile takeovers go around management. Three structures: stock (acquirer issues shares), cash (acquirer pays cash, often borrowed), or mix.
Premium paid: typically 20-40% above pre-announcement price. M&A booms when the cost of capital is low, valuations are stretched, and confidence is high — peaking right before market tops. Most acquisitions destroy value for the acquirer (academic consensus).
Premium paid: typically 20-40% above pre-announcement price. M&A booms when the cost of capital is low, valuations are stretched, and confidence is high — peaking right before market tops. Most acquisitions destroy value for the acquirer (academic consensus).
Example
Microsoft-Activision (2023): $69B all-cash deal, 45% premium. Took 21 months to clear regulators. Successful so far. AOL-Time Warner (2000): $165B all-stock deal — eventually written down by ~$99B, considered the worst merger in corporate history.