Question

1. What is a typical merger premium paid in a merger or acquisition? What effect does this premium have on the market value of the merger candidate, and when is most of this movement likely to take place?

Answer 1

Typically a merger premium is the difference in the offer price and the market price of the target company that was prior to the announcement of the takeover. The merger premium is typically 40% - 60% over the price of the target company.

The effect of the takeover premium on the market value of the merger candidate is that , this will lead to an increase the share price of the merger target. Most of the movement will most probably take before the announcement of the merger.