Tuck-In Acquisition

Tuck-In Acquisition
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Tuck-in acquisition is an operation between two companies, when one bigger company acquires the second company which is usually smaller. With the acquisition, the acquirer takes advantage of the systems and structure of the acquired company. Companies involved in this kind of operation are usually familiar with their products and services. The acquisition is profitable for the bigger company, as the transaction allows it to gain market share with the services of the smaller company. Usually, after the acquisition, the smaller company can grow and benefit from bigger company infrastructure[1].

Types of company acquisition

There are two major types of company acquisitions, which differ from each other with the final participation of the acquired company in its way of functioning after the operation[2]:

  • Bolt-ion acquisition

Those types of acquisitions are those when a bigger company is acquiring direct competitors or complementary product lines. It happens when the acquired company is the owner of some technologies, products or other things which can be profitable if used by the bigger company. Usually, after the operation, the smaller company loses its structure and impact on its way of functioning.

  • Tuck-in acquisition

This type of acquisition operation is less common than a bolt-on. The purpose of the acquisition is not the elimination of competitive company, but to become an owner of some unique technologies or products of the smaller company. Possessing those valuables can lead to expanding the services of a bigger company. The smaller company can stay intact and still function as a part of the bigger company.

Features of Tuck-in acquisition

Operations of acquisition are carried because of will to make a profit from it. It can make benefits for both companies and some problems for smaller companies also[3][4]:

  • New resources

Smaller companies, which were acquired by bigger, can make benefits from the infrastructure of the buyer. Younger, smaller companies usually have less experience in some services. If the acquisition happened because of their unique technologies, it can be developed more and merchandised better with the help of the buyer's company.

  • New services

Tuck-in acquisitions are made to become an owner of some parts of the smaller company. Possessing it can give the bigger company new market shares, which leads to more profits.

  • Dependency

If the small company is acquired by a bigger one, it can cause owners of smaller ones to lose some control, independence of the company. Although these operations give small companies new possibilities, they lose their self-reliance.

  • Costs of acquisition

Every operation of acquisition is a kind of investment. Auditing the sense of the investment should be carefully made to provide risk and calculate profits. It is a complex operation to successfully invest in a small company to make their services gain profits. If the investment is missed, it can lead to financial problems for the bigger company.

Acquiring small companies with interesting technologies and services is an easy way to make profits, as new technologies allow companies to gain new markets and attract new customers.

Footnotes

  1. Lawrence A. C. (2014)
  2. Lawrence A. C. (2014)
  3. Lawrence A. C. (2014)
  4. Ellis T. (2018)

References

Author: Anna Marzec