If an acquisition does not create value and the market is smart, then the:
A) earnings per share of the acquiring firm must be the same both before and after the acquisition.
B) earnings per share can change but the stock price of the acquiring firm should remain constant.
C) price per share of the acquiring firm should increase because of the growth of the firm.
D) earnings per share will most likely increase while the price-earnings ratio remains constant.
E) price-earnings ratio should remain constant regardless of any changes in the earnings per share.

Question

Quizplus · Accepted Answer

If an acquisition does not create value, the earnings per share can still change due to the impact of the acquisition. However, the market is smart and will recognize that the acquisition did not create value, causing the stock price of the acquiring firm to remain constant.

If an Acquisition Does Not Create Value and the Market