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When a company buys out another company is it always the case that the company doing the buying pays more than the current market value of the stock of company being bought? Can a company not bargain with a dying company for example and buy a falling stock at lower than market value?

In the case of buying the company for more than market value, are the stocks bought for significantly more, or slightly more than the current market value?

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Buyouts are usually for more than the ORIGINAL value of a stock. That's because the price "premium" represents an incentive for holders to "tender" their shares to the would-be buyer.

Sometimes in these situations, the stock price rises above the proposed buyout price, in anticipation of a higher takeover bid from a SECOND party (that may or may not materialize).

To answer the other part of the question, does a bidder have a chance of taking over a dying company for less than the market price? That is a strategy sometimes referred to as a "take under," and it has not been a notably successful strategy.

That's because it goes against "human nature" (of the seller). "Where there is life, there is hope." They would seldom accept a lower price for "sure" survival, when the market is telling them that they are worth a higher price. Very few people realize that the market may disappear tomorrow. Think of all the homeowners who won't cut their price, but insist on bids that meet recent "comps."

And if the company is really dying, the prospective buyer may be best served by waiting until it does, and then pick up the individual pieces at auction.

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Can a company not bargain with a dying company for example and buy a falling stock at lower than market value?

Of course. If the shareholders agree to it. But why would they, if the market value is higher, agree to sell to someone who offers less? If there's a compelling reason - it can happen. It might happen during a hostile takeover, for example.

In the case of buying the company for more than market value, are the stocks bought for significantly more, or slightly more than the current market value?

Again, depends on how valuable the shareholders think the company is. If the shareholders think that the company has a potential which has not yet affected the stock price, they'll want a higher premium (and they'd think that, otherwise why would they hold the stock?). How much higher? Depends on the bargaining abilities of the sides.

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1) Yes, buyouts are always higher than the trading price.

2) ANYTHING can be negotiated. There is no rule saying buyouts have to be higher.

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