What happens to stocks when companies merge?
When publicly traded companies merge, what happens to their stock depends on the structure of the deal–whether it’s a true merger of equals or a takeover of one company by the other.DefinitionStrictly speaking, a merger is an agreement by two companies to come together as equal partners in an entirely new company.EqualsIn a merger of equals, all shares of stock in the merging companies are replaced with equivalent stock in the brand new company.TakeoversMany “mergers” are actually acquisitions, or takeovers, in which one company simply takes over the other, although the deal is referred to as a “merger” for public relations or morale reasons.
