Answer (A) is correct. Studies have been made to estimate the effect of mergers and takeovers on stock prices of the bidding and target firms. The results suggest that the shareholders of target firms that are acquired receive the greatest benefit. The gains tend to be larger for tender offers than in mergers. This effect is often due to increases in the tender offer because management of a target rejects the initial offer and uses defensive tactics to oppose the takeover. Shareholders of the acquiring firms appear to earn little from takeovers because the gains from the merger tend not to be achieved. Also, shareholders of target firms not acquired frequently receive negative returns.