Evaluating M&A Deals--Announcement Effects, Risk Arbitrage and Event Risk
Synopsis
The announcement of merger or acquisition conveys new information to the capital markets. This note describes how the stock prices of a Buyer and Target behave after the announcement of a deal. First, for an all-stock deal that is certain to go through, the note defines accouchement effects and describes the fundamental arbitrage relationship between Target and Buyer stock prices. It shows how post-announcement prices may be used to infer the market's estimate of synergies. It then explains how the betas of the two companies change post-announcement and the arbitrage relationship between prices in a cash-and-stock deal. Finally, it defines event risk and explains how it affects the prices of the Buyer and the Target.
- कॉपीराईट:
- 2007 HBS
Book Details
- Book Quality:
- ISBN-13:
- Publisher:
- Harvard Business Publishing
- Date of Addition:
- 2016-08-03T01:43:56Z
- भाषा:
- English
- श्रेणी:
- Usage Restrictions:
- This is a copyrighted book.