What is an Acquisition

 Acquisition , a strategic corporate decision in which a company buys a large part, and sometimes all, of the shares in the acquired company in order to take control of the acquired company. Acquisitions are often part of a company’s growth strategy, since it is economically more profitable to get an existing company with its niche compared to expanding on your own. Purchases are often paid in cash, shares of the acquiring company, or a combination of cash and shares.

Purchases can be either friendly or hostile. Friendly acquisitions are made when the acquired company gives its consent to the acquisition acquired, while in hostile acquisitions such agreement is not reached. With this development, the acquiring company must actively buy up large shares of the acquired company in order to have a majority.

In any case, the acquiring company often offers a premium to the market price of the acquired company’s shares in order to entice shareholders to sell their shares.

Unlike the acquisition, the merger is a technique of corporate reorganization, characterized by the union of two or more companies in a new one. As the name implies, mergers are intended to merge or combine companies.With the occurrence of a merger, the merged companies disappear, giving way to one and giving rise to another company, which assumes the obligations of the previous ones.

dvantages of buying and selling companies

The great advantage of mergers and acquisitions can be summed up in a small mathematical rule: 1 + 1> 2.In other words, when two or more companies decide to merge or be acquired, the company that is formed is larger than their sum. The main advantages are:

Cost reduction and scale gain

With a merger or acquisition, companies usually come together and seek common goals. Since two or more companies will become one, this can mean optimizing processes, reducing or eliminating waste and correcting bottlenecks.Thus, the company that emerges from this process can start with a more adequate and efficient structure.

In addition, the merger can facilitate economies of scale, while also reducing input prices with suppliers. As a result, good business is more efficient in terms of cost management.

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