Many corporate acquisitions result in losses to the acquiring firm's
stockholders.  Accordingly, why do firms purchase other corporations? 
Are they simply paying too much for the acquired corporation?  A
co-worker asks your opinion.  Specifically state the reasons for your
argument.

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Clarification of Question by 8134-ga on 30 Jun 2005 10:28 PDT

Is this answer to the question, Many corporate acquisitions result in
losses to the acquiring firm's purchase other corporations?  Are they
simplu paying too much for the acquired corporation?  A co-worker asks
your opinion.  Specifically state the reasons for your argument.

Stocks are a quarter by quarter business animal, consequently when a
corporation decides to purchase another company they are doing so
because usually in the long run there are cost savings that are
factored in. Such as SBC buying ATT they immediately are going to look
to lay-off 18,000 people so they can garner the savings that they feel
they are going to get for the acquisition. The immediate lowering of
the purchasers stock happens because the savings will take a while to
filter down to the bottom line. You just don't fire 18,000 people
without inate costs that you would not have had if you hadn't made the
acquisition ie., severence pay, convergence etc. Consequently the
purchasers stock immediately falls.