A successful acquisition deal requires precise planning and execution. A single missed compliance or transactional detail can cost you a lot of time and money. This article explores the many components of an acquisition deal to help you understand how each piece fits together.
The acquisition process includes research, development, negotiation, and a formal approval of the purchase. When executed correctly, an acquisition can provide a number of benefits to both the buying and selling companies.
One of the main reasons for a company to make an acquisition is to take advantage of the economies of scale. For example, a large technology company might acquire a smaller competitor in the same space to access their software, hardware, or technology patents. In this way, the larger company gains a competitive advantage by lowering their overhead costs with access to the same tools and resources that their smaller competitors already have.
Another reason for a company to make an acquisition is for strategic purposes. In this case, the company wants to expand into new markets or geographical locations quickly and effectively. For example, Google has acquired several artificial intelligence (AI) startups in recent years to gain a variety of capabilities in a new and fast-growing area of technology.
In an acquisition, a company purchases the ownership shares of another company in exchange for cash, stock or a combination of both. A company can also acquire assets and assume debt in an asset-based acquisition. The acquiring company may also choose to buy the operating business of the purchased company to gain expertise and customers in a specific industry.