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

Question

Quizplus · Accepted Answer

While it's common for the target company's share price to increase upon the announcement of a merger due to the premium typically offered by the acquirer, the acquirer's share price does not always increase and can sometimes decrease. This is because the market may have concerns about the merger's cost, the integration process, or whether the anticipated synergies will be realized.

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