If I hold some shares of company A, A is later acquired by B. What is the market value of my share post acquisition? How is it determined?

When Company A is acquired by Company B, the value of your shares depends on the deal’s structure. Here's how it typically works:

1. All-Cash Deal

Shareholders receive a predetermined cash amount per share. This value is often set above Company A’s current market price to provide a premium.
Example: In 2012, Google acquired Motorola Mobility for $12.5 billion, offering shareholders $40 per share in cash.

2. Stock Deal

Shareholders exchange their shares in Company A for shares in Company B. The value is determined by the exchange ratio, which reflects the relative valuations of the two companies.
Example: During Disney’s acquisition of 21st Century Fox, Fox shareholders received 0.2745 Disney shares for each Fox share they owned.

3. Mixed Deal

A combination of cash and stock is provided. The final value depends on the cash portion and the market performance of Company B’s stock.

Factors Influencing Share Value

• Acquisition Premium: Buyers often pay a premium (typically 15-50%) to incentivize shareholders.

• Market Perception: Investor confidence in the merger’s potential can affect Company B’s stock price in stock-based deals.

• Post-Merger Performance: The long-term value for shareholders depends on the combined company’s financial health and market position.

Proactive Steps

• Stay informed about potential acquisitions and thoroughly review deal terms.

• Diversify your portfolio to reduce risks associated with fluctuating stock prices or market uncertainty.

Understanding whether a deal involves cash, stock, or a mix is crucial for making informed investment decisions.

For expert legal advice on mergers and acquisitions, contact Lawcrust Legal Consulting at +91 8097842911.