business acquisition

What is an Acquisition?

An acquisition is when a company purchases most or all of another firm. When an acquisition happens, the purchasing company takes ownership and assumes control over the purchased group. It's usually done to improve the buying company’s operations. There are two different types of acquisitions you should know about: friendly and hostile.

A friendly acquisition is when a company expresses interest in acquiring another firm and there’s an agreement from the target company. In a friendly takeover, a public offer of stock or cash is made, which may or may not be publicly approved. The decision is made by both the board and shareholders of the business that is being sold.

In contrast, some companies are acquired through a hostile acquisition. A hostile is usually achieved using a tender offer or through a proxy fight.  A tender offer is when there’s an offer to purchase some or all of the shares in a corporation. The investor offers a higher price per share, and the acquisition can begin without argument after owning 51% or more of the shares. Alternatively, a proxy fight is when a group of shareholders are persuaded to join forces and gather enough votes to accept the purchase. By voting out a company’s management, the purchaser is allowed to have more shareholders and board members on their side and essentially force the buyout to occur.

Last Updated: August 30, 2016

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