Acquisition / Takeover

An acquisition is when one company acquires a majority or all of the shares of another company in order to take control of it. In the case of acquisition of over 50 percent ownership, decisions can usually be made without the approval of previous shareholders.

Acquisitions are a frequent event in the business world, a natural feature of corporate operations. The acquisition can take place with the consent of the target company, but also in spite of it. In the broad news, you can usually read about the sale of high-value, well-known companies. However, acquisitions and mergers occur more often between small and medium-sized -sized companies than with large enterprises.

The acquisition is always done for some economic advantage. Typically, such an advantage can be if the acquiring company a wants to improve economies of scale of scale and efficiency. A common reason is that the buyer wants to reduce the risk of his activity, or possibly gain a larger market share wants to acquire, wants to reduce costs.

In addition, in order to facilitate the entry into the foreign market entry, it is common to acquire a company existing in the target market. As part of the growth strategy, faster expansion can be ensured through the acquisition of other companies. A typical situation is that more mature companies buy younger companies that are successful in new segments, thus gaining new markets for themselves.

Another reason for an acquisition may be to reduce competition or oversupply. If the supply of the product offered by the company is too large or there is strong pressure from emerging players, then players with strong capital can defend themselves with an acquisition. In the technological and digital sectors, it is also very common for larger, slower-moving actors to buy companies in order to acquire new technology, patents or intellectual property. In addition to all this, talent acquisition for HR purposes appeared, when the value of an acquisition is the innovative team that produces it instead of the product.

A mandatory, unmissable element of the acquisition is the valuation of the target company. During the evaluation, they do not only look at indicators related to the ability to generate income. During the process, the company's liabilities and debts are also taken into account. They also assess the likelihood of expected lawsuits. A company due diligence report consists of all of these.

The acquisition can be done with money, when the new owner pays the seller the consideration for the acquisition. It is also possible to acquire ownership through a share exchange, when the buyer transfers his own shares to the former owners of the company to be acquired. Mixed combinations of the two methods are also common. 

If the acquisition does not affect the entire company, but only a part of the business share or a certain size of the shares, then we are talking about a acquisition of shares/ownership. And if one company does not absorb the other, but the two companies continue their journey together as a third new company, then the transaction is not called an acquisition, but a association. This is usually done by a complete merger of the two companies.