Explanation

Acquisitions are good for acquiring companies, though the benefits are built into their long term growth rates. On the other hand, target companies receive a one-time spike to their values when they are acquired, after which they cease to be an independent company. So they are essentially getting an acceleration in their value to account for future potential growth, which they will no longer receive.
An acquiring company will purchase a target by paying an amount in the present that compensates the target company's shareholders for their expected future growth, hence the present value analysis that is often used to value a target company. The future growth of the target is thus transferred to the acquiring company through acquisition. Hopefully, that future growth will make a good investment, but it will only be realized over a period of years as the companies are merged and as synergies can be realized. Therefore, the benefit to the acquiring company is spread out over a very long period of time, while the target company's shareholders see a discernible short term spike in value before their wealth liquidates.
 

Sample Response

Research shows target company shareholders receiving most of the value from mergers and acquisitions. This may seem somewhat counterintuitive at first, given that acquiring companies initiate such deals. One might question why acquisitions occur at all if the target company's shareholders get all the benefit. A deeper look shows why this doesn't tell the whole story.