Glossary · Defined term
Merger
A merger is a transaction in which two companies combine into one, often to gain scale, cut costs, or enter new markets.
Last updated Oct 2, 2026
What it means
A merger is a transaction in which two companies combine into a single entity, often to gain scale, cut costs, enter new markets, or acquire technology. Deals can be paid in cash, in shares of the buyer, or a mix, and large mergers typically require approval from both sets of shareholders and from antitrust regulators. Announced mergers often move both stocks: the target usually jumps toward the offer price while the acquirer may dip on concerns about overpaying. Not all announced deals close; financing can fall through or regulators can block them. A completed merger reshapes both companies' competitive positions.
An example
For illustration, Company A agrees to buy Company B for $50 per share in cash when B trades at $42. B's shares typically jump toward $50 on the news, while A's shares might slip as investors weigh the price paid. If regulators block the deal months later, B's shares usually fall back toward their pre-deal level.