A successful acquisition deal can be a great way to increase revenue, diversify your business, and improve market share. This type of deal also allows you to gain access to existing technologies and processes that would be extremely expensive to develop on your own. However, a successful acquisition also requires thorough due diligence and a clear plan for integration.
One of the most common reasons for a business to consider an acquisition is to gain instant market entry into new locations or markets. This could be achieved through a horizontal merger (a parent company buys a competitor in the same industry sector) or a vertical one (a subsidiary company buys a product line from another company within the supply chain).
In some cases, the need to acquire can simply be a matter of survival. A challenging economic climate can stifle growth, or even put a business out of operation. As such, it’s not uncommon for companies to make acquisitions to reduce their overhead, eliminate competition, and focus on the most productive parts of their business.
The most common method for acquiring a business is a tender offer. In this type of transaction, the acquiring company communicates directly with the stockholders of the target business to offer them a purchase price that is higher than the market price. The purchase price can be in cash or in a combination of cash and company stock. If the acquiring company offers to pay only cash, it’s called a takeover.
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