Acquisition is a business growth strategy that allows companies to expand their market share, gain access to new technology or intellectual property, or increase their customer base through the purchase of another company or its assets. The process can be complex, involving a variety of steps from conducting initial target filtering and due diligence to negotiations, regulatory approvals, and post-merger integration planning.
A key challenge of Acquisition is ensuring that the strategic fit between the two companies is strong enough to achieve business growth synergies. Many Acquisitions fail because of mismatched cultures or lack of clear business objectives for the combined entities.
The most common way for a company to grow through Acquisition is to acquire a firm that has specific technologies or services it needs but does not have the resources to develop internally. For example, an e-commerce platform may need to invest in logistics services to deliver goods to clients but could save time and money by acquiring a specialist company that already has these capabilities.
Alternatively, an acquiring company can purchase the entire entity of the acquired firm to gain control and ownership of the target. This is known as a takeover or full-acquisition and usually requires the acquiring company to pay all of the target’s shareholders in cash, stock, or a combination of both. This type of Acquisition also carries more risks than a partial or asset acquisition because the acquiring company must assume all of the target’s liabilities.