Acquisition

AAA

DEFINITION of 'Acquisition'

A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both.

INVESTOPEDIA EXPLAINS 'Acquisition'

Acquisitions can be either friendly or hostile. Friendly acquisitions occur when the target firm expresses its agreement to be acquired, whereas hostile acquisitions don't have the same agreement from the target firm and the acquiring firm needs to actively purchase large stakes of the target company in order to have a majority stake.

In either case, the acquiring company often offers a premium on the market price of the target company's shares in order to entice shareholders to sell. For example, News Corp.'s bid to acquire Dow Jones was equal to a 65% premium over the stock's market price.

VIDEO

RELATED TERMS
  1. Continuity Of Interest Doctrine ...

    A doctrine which stipulates that a corporate acquisition can ...
  2. Asset Acquisition Strategy

    The purchase of a company by buying its assets instead of its ...
  3. All Cash, All Stock Offer

    A proposal by one company to purchase all of another company's ...
  4. Contingent Value Rights - CVR

    A type of right given to shareholders of an acquired company ...
  5. Friendly Takeover

    A situation in which a target company's management and board ...
  6. Mini-Tender

    A type of third-party offer made to a company's shareholders ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Retirement

    If a company undergoes an acquisition can an employee withdraw 401(k) funds tax free?

    Although the participant may be eligible to withdraw the funds if a plan is terminated as a result of an acquisition or other similar transaction, this does not mean that the 10% penalty will ...
  3. Investing Basics

    Conglomerates: Cash Cows Or Corporate Chaos?

    Huge companies may not be as infallible as previously assumed. Find out why bigger isn't always better.
  4. Bonds & Fixed Income

    Cashing In On Corporate Restructuring

    Companies use M&As and spinoffs to boost profits - learn how you can do the same.
  5. Brokers

    Catching Comeback Stocks For Clients

    We'll give you the clues you need to assess which stocks can make a turnaround.
  6. Entrepreneurship

    Public Relations: Offering Businesses A Competitive Advantage

    To maximize the sales potential of any business, a public relations program should be part of the master marketing plan.
  7. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  8. Investing

    What is the difference between an acquisition and a takeover?

    There is no tangible difference between an acquisition and a takeover; both words can be used interchangeably - the only difference is that each word carries a slightly different connotation. ...
  9. Budgeting

    Consulting - Everybody's Doing It, Should You?

    Fancy yourself a problem solver? Management consulting might be right for you.
  10. Professionals

    Acquire A Career In Mergers

    This exciting sector demands a lot from its advisors. Are you up for it?

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center