Reviewed by Oct 05, 2020| Updated on
A predator is considered a financially wealthy corporation that can chew up someone else in a merger or acquisition. The company making the acquisition or the predator is said to have sufficient financial means to bear the acquisition-related risks.
Predators are said to be financially robust and very productive firms. Usually, they are the ones who initiate any mergers or acquisitions. By contrast, those on the other end of the spectrum or those who are the predators' weaker targets are called the prey. This is because more powerful companies can quickly pick them up.
The term predator, particularly in the case of hostile takeovers, can have a negative connotation. But in other situations, a threat may also be the saving grace for a smaller, failing business that has no other choice but to merge or be acquired.
A big company is evolutionary, as is the real world. So it makes sense that in the corporate world predators and preys would exist. Every business goes through some evolutionary phase whether it's growing and strengthening to become a predator, or becoming the prey and being consumed by the competition.
Although strategic acquisitions can be a great way to expand, financial risk can be considerable. The attacker needs to do a thorough study to ensure that the target or the victim is not overpaid. It also has to do its due diligence to ensure there are no lurking surprises in the target company.
Finally, restructuring and consolidation of the two companies into one unified entity can require substantial financial resources once the acquisition is complete.