Defensive Acquisition

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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. Merger

    The combining of two or more companies, generally by offering ...
  5. Asset

    1. A resource with economic value that an individual, corporation ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
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