What is Acquisition of Business?

Business Acquisition is the process of buying a company to build on strengths or weaknesses of the company making the purchase. It can also be defined as a corporate action in which a company acquires ownership of another company by buying most, if not all of the other company’s ownership stakes. This thus enables the acquiring company to assume control of the newly-purchased company. An acquisition occurs when a buying company obtains more than 50% ownership in a target company. As part of the exchange, the acquiring company often purchases the target company’s stock and other assets, which allows the acquiring company to make decisions regarding the newly acquired assets without the approval of the target company’s shareholders. Acquisitions can be paid for in cash, in the acquiring company’s stock or a combination of both.

The process begins with defining the type of business that would make a good acquisition. Generally businesses within the same segment or a highly complementary market segment are targeted. Once defined the target business is approached and if interest is shown due diligence is performed to ascertain the financial and other conditions of the business. When the financial terms are agreed upon, and the contract is signed the merger portion of the acquisition begins. Overlapping processes, personnel and products are evaluated and the better-performing pieces are retained…

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