Defensive Acquisition

DEFINITION of 'Defensive Acquisition'

The act of firms acquiring other firms and assets as a defense against market downturns or possible takeovers. A defensive acquisition contrasts with the normal impetus for an acquisition, which is usually increased market share or revenue.

BREAKING DOWN 'Defensive Acquisition'

A company will sometimes engage in a defensive acquisition strategy by purchasing smaller firms that are in the same business. By acquiring these firms, the company protects itself from takeovers from other companies, which, as a result of antitrust laws, may not be able to merge with the enlarged company without creating a monopoly.

If a North American car company acquired an SUV company as a result of the projected rise in demand for SUVs, this would be an example of a defensive strategy through the purchase of assets.

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RELATED FAQS
  1. Why is buying a utility stock known as defensive move?

    Utility stocks are known as defensive stocks for investors due to the fact that consumer demand will remain high even when ... Read Answer >>
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    When a firm acquires another entity, there usually is a predictable short-term effect on the stock price of both companies. ... Read Answer >>
  3. What other sectors besides utilities are known as defensive?

    See why certain sectors, other than utilities, are considered defensive and therefore more resistant to the downturns of ... Read Answer >>
  4. How do companies use the Pac-Man defense?

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