How come companies buy smaller companies for a price well above the stock price?

Question

How come companies agree to deals where they buy an openly traded company for an agreed upon amount per share way above what the stock is currently trading at? Why don;t they just buy all the shares on the open market?

Answer 1

Because there are only a few hundred (or maybe a few thousand) shares at a time being traded at the price you see.  No where near enough to get a controlling interest.  If they started buying on the open market, they would gobble up all the shares available at that price and then the price would start to rise.  How high would it rise as buying continues?  Nobody knows!  So the think they are better off negotiating a set premium over market and then they know what it's going to cost them.

Answer 2

the buying companies buy an openly traded company for a price well over the market traded price and it has many reasons to it..one can be the company being acquired is less valued secondly and one of the main reasons is that in an open market not enough number of stocks would be available..and a company can be acquired only from individuals or people or other companies who hold a contrling stake and they sell there shares for a premium as it gives the right to ownership...