Why You Should Care About M&A When Considering Stocks to Buy

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Why do investors care about mergers and acquisitions?

And here's an even bigger question: Why should you care?

We break it all down in our TheStreet Explains series.

Well, for starters, you can make explosive returns on a stock if you think the company is going to get bought out.

Here's an analogy of how this works. 

It's like when one animal eats another.

Yes, the animal getting eaten doesn't want to get eaten, but in markets, you - the prey - want to get eaten. If you're a shareholder in a company that's going to get bought out, you want to get eaten by the predator, or in stock market terms, the buyer.

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Hopefully this acquisition is a friendly one because some are actually known as hostile takeovers.

The predator gobbles up the prey in order to become bigger and stronger. But in finance, the "prey" makes a lot of money.

Want to see how this analogy works when compared to M&A in real terms? Watch the video above.  

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