Business acquisition
Encyclopedia
Business acquisition is the process of acquiring a company
to build on strengths or weaknesses of the acquiring company. A merger is similar to an acquisition but refers more strictly to combining all of the interests of both companies in to a stronger single company. The end result is to grow the business in a quicker and more profitable manner than normal organic growth would allow.
that would make a good acquisition. Generally businesses within the same segment or a highly complementary market segment are targeted. Once defined the target business is approached and if interest is shown due diligence
is performed to ascertain the financial condition of the business.
When the financial terms are agreed upon, and the contract is signed the merger portion of the acquisition begins. Overlapping processes, personnel and products are evaluated and the better-performing pieces are retained, while the
is dependent on the sales cycle, which is now external to the business. In this scenario the acquiring business may be forced into paying a premium to the affiliate, to regain control of the process without upsetting current customers and cash flow. In rare instances the affiliate
will gain so much influence that it can purchase the parent company.
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
to build on strengths or weaknesses of the acquiring company. A merger is similar to an acquisition but refers more strictly to combining all of the interests of both companies in to a stronger single company. The end result is to grow the business in a quicker and more profitable manner than normal organic growth would allow.
Process
The process begins with defining the type of businessBusiness
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
that would make a good acquisition. Generally businesses within the same segment or a highly complementary market segment are targeted. Once defined the target business is approached and if interest is shown due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
is performed to ascertain the financial condition of the business.
When the financial terms are agreed upon, and the contract is signed the merger portion of the acquisition begins. Overlapping processes, personnel and products are evaluated and the better-performing pieces are retained, while the
Single business acquisitions and split and sell
A single acquisition refers to one company buying the assets and operations of another company and absorbing what is needed while simply discarding duplicated or unnecessary pieces of the acquired business. "Split and sell" acquisitions involve buying an entire business in order to gain one or two pieces of the business. The acquiring business may wish to retain the customer list and a product line, while moving manufacturing and other production related duties to an existing line. In this case the excess is often sold off to recapture some of the acquisition cost..Affiliate acquisitions
Businesses that use affiliates to sell and market their products may find themselves in the position of losing control of the marketing portion. This presents a danger as the entire business cycleBusiness cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...
is dependent on the sales cycle, which is now external to the business. In this scenario the acquiring business may be forced into paying a premium to the affiliate, to regain control of the process without upsetting current customers and cash flow. In rare instances the affiliate
Affiliate
An affiliate is a commercial entity with a relationship with a peer or a larger entity.- Corporate structure :A corporation may be referred to as an affiliate of another when it is related to it but not strictly controlled by it, as with a subsidiary relationship, or when it is desired to avoid...
will gain so much influence that it can purchase the parent company.