Guys,
I got this in an interview, but was abit confused:
If Company A announces that it is to acquire Company B, and B's stock price goes up, why would the market react the way it did? (not taking forward multiples into account, i.e. not taking increase in EPS etc into a/c)?
Thanks!
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Because usually there is a takeover control premium (usually in the 15-35% range) in the bid price ---> market bids up shares up until that price as it is "undervalued" without premium (for acquirer)
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