Acquisition

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What is an 'Acquisition'

An acquisition is 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.

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.

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RELATED FAQS
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    A tuck-in acquisition, often referred to as a "bolt-on acquisition", is a type of acquisition in which the acquiring company ... Read Answer >>
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    Evaluate whether a company is a good acquisition candidate by analyzing its price, debt load, litigation and financial statements. Read Answer >>
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    Learn how mergers and acquisitions, despite what the media portrays, actually take place more often among small companies ... Read Answer >>
  4. Under what circumstances might a company decide to do a hostile takeover?

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