M&A behaves very
similar to Ricardian Trade Model.
MOST of the time, smaller companies who are getting acquired or merged together gains. HOWEVER,,,,,,,,,,,,,,,, when the company pays about < ~28% premium, it is actually not a premium. If you look at M&A or LBOs, it is usually just giving tax premium to the share holders.
CASE EX (again example): You bought TTWO for $5/sr few mo ago, and you want to keep that for a year to just pay the Capital gains tax. Mo after you purchased TTWO, ATVI offered $7/sr. WHen the merger finalize in 5mo (again ex), you only held the stock for ~6month. It means, you have to pay investment income taxes (not cap gain taxes). The premium ATVI gave to shareholder are mainly going to IRS' pocket. You basically didn't make too much $$ as you wanted.
Quote:
Originally Posted by jasonn
Hey so my next question is if anyone here ever buy stocks based on acquisition announcements.
Like recently:
the Amazon acquisition of Twitch
the Burger King acquisition of Tim Hortons
the potential Activision acquisition of Take-Two
if you do buy, do you typically buy the company that is being acquired? or both? or?
many thanks as always.
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