Acquisition is the process of a business purchasing and taking over another company. It can be a more efficient way to grow than starting from scratch, but it can also come with some risks and liabilities that must be considered. Acquisitions can be conducted for a variety of reasons, including increasing market share, expanding into new markets, or cutting out competition. Some of the largest acquisitions have been made by tech companies, but they can happen in any industry. The 1990s were a decade of acquisition frenzy with some of the biggest deals in history being made.
The acquiring company may choose to purchase the entire target firm, in which case it is considered a full acquisition. The acquiring firm can also choose to purchase a controlling stake, which gives it the power to make decisions for the seller without shareholder approval. This is known as a hostile takeover and is the opposite of a friendly acquisition.
When evaluating a potential acquisition, the acquiring company must thoroughly research and analyze the firm to ensure that it is a good fit. They will consider the company’s profits, revenue, cash flows, and other financial metrics to determine whether it is under- or overpriced. They will also look at the company’s physical assets to assess their condition and use. In addition, they will look at the company’s past performance in the industry and its relative market to determine its value. There are four types of acquisitions based on the relationship between the acquiring and acquired firms: vertical, horizontal, conglomerate, and congeneric.
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