How Deals Work
A merger or acquisition moves through a series of steps, from first approach to closing, and can take months or years. Here is the typical path, with a real example of a bidding war from 2026.
From approach to close
| Step | What happens |
|---|---|
| Approach and talks | A buyer proposes a deal, often privately |
| Due diligence | The buyer examines the target’s books and contracts |
| Merger agreement | Price, terms and a breakup fee are signed and announced |
| Shareholder vote | Target shareholders, and sometimes the buyer’s, approve |
| Regulatory review | Antitrust and other agencies examine the deal |
| Closing | Shareholders are paid in cash, stock or both |
A typical sequence; details vary.
Friendly, hostile and bidding wars
Most deals are friendly: the target’s board agrees. In a hostile bid, the buyer goes directly to shareholders, often with a tender offer. Sometimes several buyers compete. In December 2025, Netflix agreed to buy Warner Bros. at $27.75 a share. Paramount Skydance countered with an all-cash offer, and in late February 2026, Warner Bros. Discovery’s board accepted Paramount’s $31 a share. Netflix declined to raise its bid and was entitled to a $2.8 billion breakup fee.
Breakup fees
Merger agreements usually include termination fees. The target pays one if it walks away for a better offer; the buyer may pay a reverse fee if the deal fails, for example on regulatory grounds. These fees compensate for time, costs and lost opportunities.
How long it takes
Simple deals can close in a few months. Large deals facing antitrust review often take a year or more. Electronic Arts’ take-private, announced Sept. 29, 2025, closed on Aug. 4, 2026. Union Pacific’s proposed purchase of Norfolk Southern, announced in July 2025, faced a regulatory timeline running into 2027.
Key takeaways
- Deals move from talks to agreement, votes, reviews and closing.
- Hostile bids and bidding wars can raise prices.
- Breakup fees compensate the losing side.
- Large deals can take a year or more.