A business acquisition is when one company purchases a portion, or all the company's share, to gain more or all of control of that company. When a company purchases a company for more than 50% of the target firm’s stock, the acquirer is then allowed to make any decisions regarding the company without the approval of other shareholders. News outlets like to cover the larger acquisitions of companies, but truth be told companies are bought and sold on a regular basis. Another way to describe a business acquisition is called mergers and acquisitions. There are many reasons why companies acquire. They might seek economies of scale, diversification, greater market share, increased synergy, cost reductions or new niche offerings.
If a company were to look to expand to different territories or locations, they could look to acquire companies from various markets. The company that is being purchased might already have an established brand name with other intangible assets that can help start the acquisition off with a more solid base. In addition, acquiring a company could mean less competition which could help companies focus on more productive tasks. Acquiring a company could mean for the gaining of newer technologies. If the company that is being bought has better technologies, it could mean less time and money spent on newer technologies. Companies may also look for younger companies to acquire to incorporate into their revenue stream as a new way to profit.
Companies evaluate if they would like to acquire a company based off several metrics yet vary by industry. When most acquisitions fail, it is because they pay too much for the company, therefore, acquisitions are based off mostly if the price is right. Companies looking to acquire another pay a large amount of attention to the debt load as companies with a high level of liabilities might not be the best bet for an acquisition.