Introduction
The term acquisition is typically used to refer to the process of gaining control over an asset or a company by one entity or company. This process is commonly known as corporate acquisition, mergers, and acquisitions (M&A), and the most common type of acquisition is the purchase of a majority stake in a company by another company or individual. In this article, we will discuss the various aspects of acquisition, including its definition, types, and procedures. We will also discuss the implications of acquisition and its advantages and disadvantages.
Definition
Acquisition is defined as the process of gaining control over an asset or a company by one entity or company. This process is commonly known as corporate acquisition, mergers, and acquisitions (M&A). The most common type of acquisition is the purchase of a majority stake in a company by another company or individual. In this case, the acquiring company or individual obtains control of the target company and its assets.
Types of Acquisition
There are several types of acquisition. These include:
• Mergers: Mergers are a type of acquisition in which two firms combine to form a single entity. This type of acquisition is often used to achieve a competitive advantage.
• Takeovers: Takeovers are a type of acquisition in which one company acquires another company. This type of acquisition is often used to gain control over a particular sector or market.
• Joint Ventures: Joint ventures are a type of acquisition in which two or more companies collaborate to create a new business venture.
• Strategic Alliances: Strategic alliances are a type of acquisition in which two or more companies form a partnership in order to gain a strategic advantage.
Acquisition Procedures
The process of acquisition typically involves several steps. These steps include:
• Identifying a target: The first step in the acquisition process is to identify a suitable target. The target must be financially sound and have the potential to provide a positive return on investment.
• Negotiations: After a target is identified, negotiations between the two parties must take place. This is typically done through a series of meetings and discussions that involve both parties.
• Due Diligence: Once negotiations have been completed, due diligence must be performed to ensure that the target is a good fit for the acquiring company.
• Closing: After due diligence is completed, the two parties sign a final agreement and the acquisition is officially closed.
Implications of Acquisition
The process of acquisition can have both positive and negative implications. On the positive side, acquisition can lead to increased market share, improved efficiency, and cost savings. On the negative side, acquisition can lead to increased debt, reduced competition, and potential conflicts of interest.
Advantages and Disadvantages
The process of acquisition can have several advantages and disadvantages for both the acquiring company and the target company.
Advantages:
• Increased market share
• Improved efficiency
• Cost savings
• Increased access to resources
• Expansion of product and service offerings
Disadvantages:
• Increased debt
• Reduced competition
• Potential conflicts of interest
• Loss of autonomy
• Cultural clashes
Conclusion
Acquisition is a process in which one entity or company gains control over another asset or company. There are several types of acquisition, including mergers, takeovers, joint ventures, and strategic alliances. The process of acquisition typically involves several steps, including identifying a target, negotiating, performing due diligence, and closing. Acquisition can have both positive and negative implications for both the acquiring and target companies, and there are both advantages and disadvantages to the process.
References
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Panno, A. (2018). Advantages and Disadvantages of Mergers and Acquisitions. Investopedia. Retrieved from https://www.investopedia.com/articles/investing/062615/advantages-and-disadvantages-mergers-and-acquisitions.asp
Rivkin, J. W., & Siggelkow, N. (2005). When to Acquire and When to Integrate. Harvard Business Review, 83(3), 106-114.