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.


Loading the player...

BREAKING DOWN '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.

  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. Acquisition Premium

    The difference between the estimated real value of a company ...
  5. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  6. Acquisition Fee

    A fee charged by a lessor to cover the expenses incurred in arranging ...
Related Articles
  1. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  2. Stock Analysis

    How UPS Plans to Benefit from Its Coyote Acquisition

    Understand the business models of UPS and Coyote Logistics. Learn about the top four ways in which UPS will benefit from the acquisition of Coyote Logistics.
  3. Stock Analysis

    The 5 Best Alternatives to Zillow & Trulia

    Understand the online real estate industry and how Zillow and Trulia are industry leaders. Learn about alternatives to Zillow and Trulia.
  4. Stock Analysis

    The Biggest Risks of Investing in Gilead Stock

    Examine the current position of Gilead Sciences, Inc., and learn the major risks for investors considering buying Gilead stock.
  5. Entrepreneurship

    Top 5 Most Successful Canadian Entrepreneurs

    Understand what makes an entrepreneur successful. Learn about five Canadian entrepreneurs who were able to achieve success in their respective times.
  6. Stock Analysis

    JP Morgan Chase & Co. Vs. Bank of America Stock

    Examine two of the big four U.S. money center banks, Bank of America Corporation and JPMorgan Chase & Company, by comparing important equity evaluation metrics.
  7. Entrepreneurship

    Top 3 Most Successful French Entrepreneurs

    Learn about some of the most famous and successful entrepreneurs who either hail from France or have chosen to relocate to France as their home.
  8. Entrepreneurship

    Top 3 Most Successful Australian Entrepreneurs

    Learn interesting biographical information about some of the most famous and successful entrepreneurs who are originally from Australia.
  9. Stock Analysis

    The 6 Biggest Life Insurance Companies in Canada

    Read about the biggest life insurance companies in Canada, and learn about their business operations and the types of products they offer.
  10. Stock Analysis

    Mobile Payment Battle: Samsung Pay Vs. Apple Pay

    Examine and compare the two primary mobile phone payment systems being offered to consumers in 2015 through Apple Pay and Samsung Pay.
  1. Who are Daimler / Mercedes' (DAI) main suppliers?

    Daimler and Mercedes-Benz have a network of over 100 suppliers. Some of their principal suppliers include Thyssenkrupp, Eagle ... Read Full Answer >>
  2. What are the best mutual funds for investing in the aerospace sector?

    The only current mutual fund that is directly targeted to the aerospace and defense sector is the Fidelity Select Defense ... Read Full Answer >>
  3. How does the level of mergers and takeovers in the Internet sector compare to the ...

    The level of mergers and takeovers in the Internet sector is higher than in the broader market. The Internet sector contains ... Read Full Answer >>
  4. What business structures expose entrepreneurs to unlimited liability?

    A company that seeks to expand through a horizontal integration can achieve economies of scale, economies of scope, increased ... Read Full Answer >>
  5. How are direct costs allocated differently than indirect costs?

    One of the clearest examples of horizontal integration is Facebook's acquisition of Instagram in 2012 for a reported $1 billion. ... Read Full Answer >>
  6. Is it wise for a company to have heavy cash flow investing activities outside of ...

    It is only wise for a company to have heavy cash flow from investing activities outside of capital expenditures if that company ... Read Full Answer >>
  7. What's the difference between a merger and an acquisition?

    Mergers and acquisitions are two of the most misunderstood words in the business world. Both terms are used in reference ... Read Full Answer >>
  8. How did Rupert Murdoch become a media mogul?

    Rupert Murdoch's father was a journalist and newspaper owner in Australia. Upon his death in 1952, Rupert inherited the News ... Read Full Answer >>
  9. Why would a company want to do an acquisition of another company?

    In general, a company only pursues an activity to increase its short- or long-term profitability, stability or competitiveness. ... Read Full Answer >>
  10. 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 ... Read Full Answer >>
  11. 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 ... Read Full Answer >>
  12. What does the term "stock-for-stock" mean?

    The term "stock-for-stock" is popularly used in two different contexts, and it regularly makes business news headlines in ... Read Full Answer >>
  13. Why do companies merge with or acquire other companies?

    Some of the reasons for mergers and acquisitions (M&A) include: 1. Synergy: The most used word in M&A is synergy, ... Read Full Answer >>
  14. In M&A how does an all-stock or all-cash deal affect the equity of the buying company?

    Mergers and acquisitions (M&A) are forms of corporate restructuring that are becoming increasingly popular in the modern ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!