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The London stock market is in the grips of an acquisition “feeding frenzy” with new deals coming in quickly.
As City experts predict the takeover bonanza will continue, it’s important to know what to do if a company in which you own stock becomes a takeover target.
What happens if a company I own shares in receives a takeover offer?
The stock price of a target company often soars upon news of a takeover bid.
If the stock reaches the offer price, it’s a good sign that investors are interested in the deal. But if the target company’s stock exceeds that amount, it indicates that the market expects a higher offer and even a bidding war. And if the price languishes below the value of the offer, shareholders are likely to be unimpressed by the offer or believe it will fail.
What should I do next?
Shareholders have several options following a takeover bid. You could sell your shares at a premium after an offering.
Buying bonanza: London stock market in the grip of a takeover “feeding frenzy” with new deals coming in fast
For example, shares in International Distribution Services, owner of Royal Mail, were worth 214 pence each before a bid from Czech Sphinx Daniel Kretinsky. After the board reached a deal with the billionaire last week, the price rose to 335p.
An IDS investor with 1,000 shares would get £3,350 at that price, about £1,210 more than they were worth before the offer.
If you do nothing and the deal goes ahead, your shares will be replaced with cash or shares in the new company, depending on the terms of the offer. But keep in mind that if a deal falls through, the company’s stock value could plummet.
How can I give my opinion?
All acquisition deals must be voted on by shareholders so that investors can have their say. Typically, you will get one vote for each common share you own.
Many retail investors buy shares through investment platforms such as AJ Bell, Hargreaves Lansdown and Interactive Investor.
You will need to contact the platform you used to purchase your shares to find out how to vote. Investors who indirectly own shares through funds or pensions do not get a vote.