What Is an Acquisition?
An acquisition occurs when one company purchases a majority or all of another company’s shares to gain control of its business and assets, allowing the acquiring company to make decisions without approval from other shareholders.
Definition
An acquisition is a transaction in which one company purchases more than 50% of another company’s shares or assets to take control of that business. This level of ownership gives the acquiring company decision-making authority over the acquired company.
Once completed, the acquiring company can influence operations, strategy, and asset use without requiring consent from remaining shareholders.
How It Works
In an acquisition, the acquiring company buys a controlling interest in a target company, typically through purchasing shares or assets. Ownership exceeding 50% establishes control and the ability to direct business decisions.
Acquisitions may be agreed upon by both companies or pursued without the target company’s consent. The structure and execution vary depending on the transaction terms and legal requirements.
Why the Term Matters
Acquisitions are a common method for companies to expand operations, enter new markets, reduce competition, or obtain new technologies. Understanding acquisitions helps explain changes in company ownership, market structure, and corporate control.
They also provide context for how companies grow or consolidate within industries.
Related Concepts
- Merger
- Takeover
- Friendly acquisition
- Hostile takeover
- Vertical acquisition
- Horizontal acquisition
FAQs
What defines an acquisition?
An acquisition is defined by one company purchasing a majority or all of another company’s shares to gain control.
How much ownership is needed for an acquisition?
More than 50% ownership is typically required to establish control of the target company.
Are acquisitions always friendly?
No, acquisitions can be friendly when both companies agree or hostile when the target company resists the purchase.
How is an acquisition different from a merger?
An acquisition involves one company absorbing another, while a merger combines two companies to form a new entity.
What are common types of acquisitions?
Common types include vertical, horizontal, conglomerate, and congeneric acquisitions.
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