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.