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Comment by kccqzy | Hacker News Reader

How does management benefit from M&As? Sorry if this is a basic question. Do executives get paid based on the number of acquisitions?

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Two ways:

Bonuses by juicing revenue numbers

Bigger next job by doing M&A and having really good-looking resume and interview story.

See item #6 here

https://corporatefinanceinstitute.com/resources/valuation/mo...

> Additionally, managers may prefer mergers because empirical evidence suggests that the size of a company and the compensation of managers are correlated.

Yeah, that's where my mind went. Executive and upper management salaries seem to be a function of revenue, not profit.

A lot of compensation works that way, to be honest. First order is that you get a percentage of whatever river of money you sit close to, regardless of effort or skill.

Esp when you are talking about software. Revenue means you have a customer that is locked up. Once you are ready to get profit, reduce costs/jack up prices and profit comes rolling in.

If I hold stock in a company, then my company acquires that company, the stock rises, and I liquidate my position in it after 6 months or whatever the cool-down period is, is this considered insider trading?

If you hold stock in company A, and your current company B acquires company A, that's not insider trading if you already owned the stock in company A before you had any information that company B was going to make that decision.

It is, however, a conflict of interest for you to be involved in company B's acquisition of company A (e.g. influencing company B to buy company A), and might even rise to the level of a breach of your fiduciary duty to company B.

I know a woman who was part of a M&A team. On her first day, she was told her days of owning individual stocks in the industry were over. She could only purchase aggregate funds. Although, I do wonder if the same rules apply to the VPs who actually have to sign off on the deals.

Insider trading is all about information held by "insiders", not about who owns what. So it would depend on whether you know something material and nonpublic when you liquidate your position (e.g., you know the acquisition is going terribly and the acquiring company is going to write it off).

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