The normal reason for paying large premiums is that shareholders aren't interested in selling at the current market rate (otherwise in a liquid market they alre

The normal reason for paying large premiums is that shareholders aren't interested in selling at the current market rate (otherwise in a liquid market they already would have). If you offer a small premium of say 10% investors might just think there is a better deal out there. Consequently the market value of the company may jump by 15% forcing you to make a new offer of 20% which the market still doesn't accept etc.. until you finally reach a negotiated price. From the numbers side of things this looks better for the buyer because you may end up with a lower buying price. However this way of buying a company takes time and is very messy, giving competitors room to organize to make competing bids or convince the board to split of specific parts of the company. Adding to the normal premiums are the current market conditions and the vast sums of liquid assets large tech companies are sitting on. Firstly the general market is down which usually means shares of healthy companies are "undervalued" (difficult to tell if they really are, but that's the consensus). Secondly liquid assets are "expensive" to own at the moment, some banks are charging negative interest on large deposits and bonds are sitting at around 0%. If you're a tech company sitting on huge piles of cash this means you want to spend that money on anything as long as it gives more than 0% interest. Shareholders know that companies have a lot of money to spend so they can demand very high premiums. Google bought Motorola mobility at a 63% premium so HP buying at 79% isn't all that strange. I wouldn't be surprised if Apple and Microsoft aren't also considering some big takeovers (GIGAOM reported that microsoft was also considering buyingMotorola) because this is the time to get get rid of those big piles of money they have.