Subject: Stocks - Mergers

Last-Revised: 9 Apr 1997
Contributed-By: George Regnery (regnery at yahoo.com)

When one firm takes another over, or merges with another, a number of things can happen to the firm's shares. The answer is, it depends.

In some cases, the shares of one company are converted to shares of the other company. For instance, 3Com announced in early 1997 that it was going to purchase US Robotics. Every US Robotics shareholder will receive 1.75 shares of 3Com stock.

In other cases, one company simply buys all of the other company's shares. It pays cash for these shares.

Another possibility, not very common for large transactions, is for one company to purchase all the assets of another company. Company X buys all of Company Y's assets for cash, which means that Company Y will have only cash (and debt, if they had debt before). Of course, then company Y is merely a shell, and will eventually move into other businesses or liquidate.

Previous article is Stocks: Initial Public Offer.. Next article is Stocks: Market Capitalizatio..

Category is Stocks Index of all articles