The Art of a Business Acquisition |
Posted: April 19, 2017 |
What is a Business Acquisition? A business acquisition is an action used in the corporate world that takes place under the guidance of industry experts such as Sheffield accountants Sochall Smith. In the business acquisition, a company buys most of, if not all of, the ownership stakes of another firm so as to assume control of that firm. Acquisitions occur whenever the buying company obtains anything above 50 percent of the target company regarding ownership. The exchange can also include the stock and various other assets that belong to the target company, and this can them allow the company that is making the acquisition to make decisions about these new assets devoid of any approval given by the shareholders of the target company. An addition can be made that is paid for by cash, by offering the stock of the acquiring company, or through a combination of both of these assets together.
Why Make a Business Acquisition? There are many different reasons for one company to acquire another one. Perhaps it's because they wish to take advantage of economies of scale, they want to have a greater market share, to reduce costs, increase synergy, or make an offering in a new niche. Should the acquiring company want to expand operations and focus more internationally, investing in an existing company could be the only way that is viable to enter into a foreign market. Either this, or it could prove to be the easiest method regarding having an existing brand name, the business will have the personnel, and possibly an existing customer base, too. Often, the company makes acquisitions regarding the growth strategy of a company whereby it provides more benefits to taking over a firm that is currently in existence as opposed to expanding its operations. Larger businesses can find it tricky to continue to grow without the loss of efficiency. So, as a way of obtaining a higher level of growth and additional profits, the larger firm may wish to acquire younger companies that look promising, after which, this younger company will incorporate with the larger company's revenue stream. Whenever there is too much competition within an industry, or there's too much ramping up of supply from existing firms, acquisitions can be used to eliminate competition, reduce excess capacity, or to focus on those providers that are the most productive. Should there be an emergence of a new technology that could potentially increase productivity, companies might decide that purchasing a competitor who already owns the technology is the most cost-efficient way forward. It may be too difficult or too time to consume to invest in research and development. Therefore, the company looks to buy out the current assets of another company that has gone through this process already.
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