What Happens to Stock Prices When Companies Merge?
The stock price of the target company usually rises immediately after the announcement of a coming merger. The stock price of the acquirer usually falls at that time. After the agreement has closed, the stock price of the combined company should equal the pre-merger value of each company, plus whatever accretion of value has come about through the combination itself (this accretion is known as “synergy”), divided by the number of post-merger shares.
