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Investment Dictionary


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Acquisition

 

An acquisition is a takeover of one corporation by another when shares are bought and control of management is overtaken. Acquisition is an M&A deal and as targets for acquisition usually become some competing businesses or suppliers of the company. 

 

Growing corporations are always looking for proper acquisition targets and right time for it. Synergy is the main reason for acquisitions, but beyond that other motives and ambitions take place. Acquisition may create value for shareholders or can destroy it depending on the paid price and the scale of synergy. 

 

The price of an acquisition has to be paid mainly in cash or fixed income securities, or otherwise such transaction may be considered a merger but not an acquisition. Usually price paid for a target depends on valuation multiples in the investment market, but when the market is booming in many cases a premium for control interest is paid. 

 

Every acquisition of closely held corporation is a friendly takeover. But if the target is a publicly owned corporation, then hostile takeover is possible too.

 

 






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