Acquisition strategies
Acquisition strategies
An acquisition is defined as the purchase of a company’s shares by another company. An organization can buy another one with cash, stock, debt recovery, or assets. When a firm is purchasing more than 50% of the assets, the acquirer is allowed to make decisions without the approval of the other shareholders. So, by doing an acquisition, it doesn’t create a new organization as is the case for mergers. The terms “mergers” and “acquisitions are often used in the same way, but their meaning is different. Indeed, a merger is when two companies are combining into a new entity. In both cases, mergers and acquisitions directly impact the company’s culture, ownership, and way of doing things. The business term “acquisition strategy” is a method used by companies to purchase other firms in order to be more profitable. It refers to the concept of synergy which suggests that companies are better combined and more valuable than separate.
Benefits and drawbacks
There isn’t a good way to make acquisitions successful because each company has its strategic logic. It depends on the size of the enterprise or for instance its main goal. However, the strategy should not be a vague concept like growth, but it should be something more specific and the acquirer has to be sure the acquisition will generate value.
In general, companies are willing to do an acquisition to improve their performance, strengthen their market position, and acquire skills, technologies, or human capital at a lower cost or more quickly. Furthermore, they can buy another company to enter a new business area (diversification) or a new foreign market and remove the competition from an industry. Most of the time benefits from acquisitions are about cost-cutting and economies of scale.
However, there can be some complications in the absorption process such as complaints, fear from employees about losing their jobs, or also a loss of motivation for some of them because they will have to learn new habits. In order to avoid those drawbacks, the choice of acquisition strategy is really important.
Strategies
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