Defensive Acquisition

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Antitrust

    The antitrust laws apply to virtually all industries and to every ...
  4. Asset

    1. A resource with economic value that an individual, corporation ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. Antitrust Defined
    Personal Finance

    Antitrust Defined

  3. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  4. This ETF Offers Easy Access To Big Pharma
    Chart Advisor

    This ETF Offers Easy Access To Big Pharma

Hot Definitions
  1. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  2. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  4. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  5. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  6. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
Trading Center