Mergers and acquisitions
Mergers and acquisitions (M&A) is the umbrella term for one company combining with or buying another, through a merger of near-equals or the acquisition of a target, usually to gain scale or capability.
See it move
A target has 5,000,000 shares trading at €18.00, a standalone value of €90,000,000. An acquirer offers €22.00 a share, valuing the target at €110,000,000 — a premium of (€22.00 − €18.00) ÷ €18.00 = 22.2%, or €20,000,000 more than the target's standalone worth, paid to secure control.
Check yourself
An acquirer agrees to buy a target company with 2,000,000 shares outstanding, trading at €30.00 per share before the deal is announced. The acquirer offers €37.50 per share in cash. What premium, as a percentage of the target's pre-announcement share price, is the acquirer paying?