Deep Dive: How Mergers and Acquisitions Work — From Hostile Takeovers to Strategic Buyouts
When Paramount Global offered $111 billion for Warner Bros. Discovery in February 2026 — topping Netflix's rival bid after months of competitive negotiations — it marked the largest media deal in history. But beyond the headlines, the mechanics of how mergers and acquisitions actually work remain opaque to most investors. How do companies decide what another business is worth? What is the difference between a hostile takeover and a friendly merger? And why do some deals create enormous shareholder value while others destroy it? Mergers and acquisitions, collectively known as M&A, represent one of the most powerful forces in corporate finance. In 2025, global M&A deal volume exceeded $3.5 trillion as falling interest rates and robust corporate cash balances fuelled a wave of consolidation. With the Federal Reserve cutting rates from 4.33% in early 2025 to 3.64% by January 2026, the cost of financing acquisitions has dropped significantly, making debt-funded deals more attractive and igniting bidding wars across sectors from media to technology. For individual investors, understanding M&A is essential. A takeover announcement can send a target company's stock soaring 20-40% in a single session, while the acquirer's shares often decline as markets weigh the risks of integration and overpayment. This guide explains how the entire process works — from the initial strategic rationale through valuation, deal structure, regulatory approval, and post-merger integration — so you can evaluate any deal's impact on your portfolio.