Reviewed by Jun 11, 2021| Updated on
An acquisition is when any or all of the shares of another company are acquired by one corporation to obtain ownership of the business. Buying more than 50 per cent of the stock and other assets of a target business enables the acquirer to make decisions about the newly purchased assets without the consent of the shareholders of the company.
Acquisitions, which are very common in business, may take place with the consent of the target company, or with its disapproval. There is also a no-shop clause, with permission, throughout the process.
We often learn about the acquisitions of large well-known firms, as the press appears to dominate such big and important transactions. In fact, mergers and acquisitions (M&A) frequently occur between small to medium-sized firms in comparison to large-sized companies.
Organisations have different motives to buy other businesses. They may be looking for economies of scale, greater market share, diversification, improved synergies, cost savings, or new product offerings.
Before proceeding towards making an acquisition, it is imperative that an organisation determines whether its target firm is the right choice.
Will the price fit? The criteria investors use to assess a nominee for an acquisition vary by industry. If acquisitions fail, sometimes it is because the target company's asking price exceeds those criteria.
Check the debt load: A target company with an exceptionally high level of liabilities can be taken as a sign of possible potential problems.
Undue cases: Although lawsuits are common in business, a good applicant for the acquisition does not deal with a degree of litigation that exceeds what is fair and standard for its size and industry.
*Print the financials out: * A successful acquisition goal should have consistent, well-organised financial statements, allowing the acquirer to smoothly conduct due diligence. Full and open financials also help to prevent unnecessary surprises upon completion of the acquisition.