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When the shareholders receive the information about an acquisition or a merger, the first thing they will be concerned about is their stock in the firm. Some mergers turn out to be beneficial where the stock or share holder gets benefits in the form of bonus shares. Sometimes, it can become a risky affair where the merger drives down the value of the share, or every share might get divided.
Investment risks due to mergers or acquisitions can only be analyzed when the company announces its intentions to the share holders. A merger has lesser number of risks than an acquisition actually. Sometimes, on the contrary acquisition can actually drive up the value of the share. If the company decides to buy out a company that is not performing well, then the share value may also go down temporarily. However, the risk factors caused by mergers and acquisitions are only temporary, and as the markets improve the company finances will also go up. The share value may rise at that time. Also, several companies if they perform well due to the merger or acquisition they give out bonus shares or dividends. This is a normal market trend of the share market.
Usually an investor needs to be stay put during the merger or an acquisition and see how the share performs. The least amount of time they need to give the investment is at least 6 months.
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