Why Do Companies Spend Money Buying Other Companies?

When one company acquires another, it generally pays more than the current market value of the target. Why do companies do this, and when is it a smart idea to use capital for M&A? In this edition of Industry Focus, host Michael Douglass and Fool contributor Matt Frankel discuss the ways companies can benefit from mergers and acquisitions, and the types of M&A that should raise a red flag.

A full transcript follows the video.

Source: Fool.com