Publications
Publications
- September 2002 (Revised March 2003)
- HBS Case Collection
Technical Note on Equity-Linked Consideration, Part 2: Announcement Effects
Abstract
The announcement of merger or acquisition conveys new information to the capital markets. Shareholders and portfolio managers assess the news and trade on the basis of their new appraisals of value. Thus, from the actual Pstks of the two companies one can infer from those values what investors "think" of the transaction. The change in Pstk from the last closing price prior to the announcement to the closing price one day later is called the (one-day) announcement effect. This case series describes the basic mechanics of equity-linked consideration. Part 2 describes the mechanisms that underlie announcement effects for both the target and acquiring companies in all-stock transactions.
Keywords
Citation
Baldwin, Carliss Y. "Technical Note on Equity-Linked Consideration, Part 2: Announcement Effects." Harvard Business School Technical Note 903-028, September 2002. (Revised March 2003.)