Corporate actions
Merger and acquisition
Also called M&A or Takeover
One company buying another, for cash, shares, or a combination.
How it works
The target’s share price usually jumps towards the offer price on announcement, while the acquirer’s often falls, reflecting the premium being paid and integration risk.
The gap between the market price and the offer price reflects the probability the deal completes — regulators, shareholders and financing can all stop it.
Where it misleads people
A cash offer caps your outcome at the offer price. A share offer means you end up owning the acquirer, which may not be a company you would have chosen.
Related terms
- GoodwillThe premium paid over the fair value of a business’s identifiable assets when acquiring it.
- Spin-offA company separating part of itself into a new, independently listed company.
- Organic growthRevenue growth from the existing business, excluding acquisitions and currency effects.
- Corporate actionAny company event that changes the shares you hold or their terms.
More in Corporate actions
All 26 Corporate actions terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.