Major US and European stocks indexes signal the rise of investors’ confidence. However, the main economic data such as GDP, inflation and unemployment rates says opposite that economies are still in recession.
The reason of optimism in the equity stocks markets may be explained by increased mergers and acquisitions in 2010. Recession period is a good time for companies that generate steady incomes to exercise takeover strategies as the market value of shares in general are diminished by expectations regarding the economy state. However, most often bidders pay the premium for the targeted companies to obtain the control of the firm because existing shareholders have incentives to sell their shares only if the acquirer offers higher price for outstanding shares. Additionally, when the market realizes that new owners have strategies to increase incomes the market value of the companies rises even more.
So, when takeovers are visibly good news for existing shareholders, could the increased amount of tenders lead to the development of more competitive products and services or is it just a battle between companies that caught a moment of a good opportunity to consolidate their positions in the market and reduce rivals?
About Me
- Asta Pravilonytė
- Every manager can call him or herself a good strategist if he or she only works within an environment that is favorable; however, it is only in times of stress that one truly learns what one's capabilities are!
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