Today's big market news was a Japanese firm buying Jim Beam, Charter offering $37.4 billion for Time Warner, and Google buying Nest. Three big acquisitions in just one day makes for a frenzy on the floor. It's normally a good sign for the economy when M&A picks up. But what do you do when you invest in a company and another firm buys your firm and you get stock and/or cash for your investment. It could be good for you or it could be devastating.
The first thing that should happen is find and study the terms of the deal. One has to know if the new firm is gutting the company bought, wanting to expand the company, changing the direction of the company, and you have to know if the company acquiring your company is a good company that is worthy for your investment. Does this new company throw off your investment strategy? If it does you will have to reconsider the balance of your portfolio and move stoics around until it gets back to normal.
In my portfolio, another firm bought out my firm and I had to sit down and see what the new firm had to offer and if it fit in with the direction I wanted for my portfolio. It did not truly fit in very well. The new firm did not pay a dividend (not the sole reason I was invested in the other but because of the balance it provided some paying dividend, some not), it went in a different direction, and I did not like the managers as well. It was in the same sector and was a well run company. But in the end I had to end my position in the new firm and invest money in a different company that fit better with my portfolio.
Again the big thing about investing is knowing the direction of the firm and knowing everything about your firm.
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