Updated: 2006-10-18 14:53

An acquisition is when one larger company purchases a smaller company. Not to be confused with a "merger", which is when two approximately equal-sized companies merge to combine forces.

Usually, the company that is being acquired typically sees its stock price appreciate right after the news is announced. The company doing the buying usually sees its stock price fall.

Sometimes mergers and acquisitions can turn ugly. Watch out for your companies if this happens, because sometimes the stock prices can drop significantly on the news.

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