VPS | How should investors act in response to M&A deals?

In the financial sector, mergers and acquisitions (M&A) among listed companies are always attention-grabbing topics for investors, analysts, and the public alike. These deals have the potential to reshape industries, redefine markets, and create attractive investment opportunities. However, in the face of M&A information, stock investors need a clear strategy to leverage advantages and manage risks effectively. This article will address actions that stock investors can consider before M&A announcements from listed companies, aiming to help investors seize investment opportunities prudently and safely.

When there is information about M&A deals among listed companies, stock investors should undertake several actions to leverage opportunities and manage risks effectively.

Here are some actions that investors can consider:

1. Thoroughly research M&A information: Understand the details of the M&A deal, including the reasons for the deal, contract terms, and the strategic objectives of the participating companies. Pay particular attention to the proposed price, payment method, and deal completion timeline.

2. Evaluate the impact on both companies: Analyze the impact of the deal on both the target and acquiring companies. Consider the potential for value creation, synergy, and cultural fit between the two companies.

3. Risk analysis: Assess risks related to the M&A deal such as uncertainty about deal completion, regulatory reactions, and challenges in integrating the two companies.

4. Monitor market reactions: Track the market's reaction to M&A information, including stock price fluctuations and changes in trading trends. This can help investors evaluate the market's overall sentiment towards the deal.

5. Portfolio allocation: Consider investing in stocks of companies involved in M&A deals, which may affect risk appetite, current portfolio allocation, and the ability to achieve initial investment objectives.

6. Investment decision-making: After considering and determining that stocks of one or more companies involved in M&A deals align with investment goals and criteria, investors can consider the timing of purchases based on individual analysis or expert opinions.

7. Stay updated with news: Regularly update information to stay informed about the latest developments in M&A deals and potential impacts on the market.

In practice, M&A deals among listed companies are not new to stock investors. In fact, trading in mergers and acquisitions, or "merge-arb" trading, is a stock trading strategy employed by companies involved in mergers and acquisitions.

A typical example of merge-arb trading could be the acquisition deal between Vietnam Dairy Products JSC (VNM) and GTNfoods JSC (GTN), which began in the first quarter of 2019 and concluded in the fourth quarter of the same year. At the start of the merger, GTN's stock was trading on the market at around 10,000 VND per share. At the end of the deal, the stock price increased by over 100% from the initial value. It can be seen that the price fluctuations in M&A deals are significant, which benefits most investors who tend to hold short, medium, and long-term stocks, but the timing factor in buying and selling is crucial and can lead to different profit performances for each investor.

Conclusion:

Mergers and acquisitions (M&A) present attractive investment opportunities for stock investors, but they require caution and thorough preparation. Investors need to research M&A information, evaluate the impact on related companies, and analyze risks. Monitoring market reactions, portfolio allocation, and making investment decisions based on individual analysis or expert opinions are essential steps. Investors should further explore various investment knowledge to apply flexible and rational investment strategies to maximize profits. Regularly updating information about M&A deals ensures that investment portfolios align with each individual's investment objectives and risk appetite.