Acquisition
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Overview
Acquisition refers to the aspect of corporate strategy and management dealing with the merging and acquiring of different companies. It is often defined as the gaining of supplies or services by the federal government with appropriated funds through purchase or lease.An acquisition can take the form of a purchase of the stock or other equity interests of the target entity, or the acquisition of all or a substantial amount of its assets. These are the most common two branches of acquisition:
- Share purchases - in a share purchase the buyer buys the shares of the target company from the shareholders of the target company. The buyer will take on the company with all its assets and liabilities.
- Asset purchases - in an asset purchase the buyer buys the assets of the target company from the target company. In simplest form this leaves the target company as an empty shell, and the cash it receives from the acquisition is then paid back to its shareholders by dividend or through liquidation. However, one of the advantages of an asset purchase for the buyer is that it can "cherry-pick" the assets that it wants and leave the assets - and liabilities - that it does not. This leaves the target in a different position after the purchase, but liquidation is nevertheless usually the end result.
Acquisition can be either friendly or unfriendly. Friendly Acquisition occur when a target firm agrees to be acquired; unfriendly acquisitions don't have the same agreement from the target firm. The terms "demerger", "spin-off" or "spin-out" are sometimes used to indicate the effective opposite of a merger, where one company splits into two, the 2nd often being a separately listed stock company if the parent was a stock company.
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