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.