Posted in Finance, Accounting and Economics Terms, Total Reads: 848
Definition: Tuck-In Acquisition
The acquisition of another company in order to get a competitive advantage is tuck in acquisition. The acquiring company usually merges the acquired company into one the department. Instead of opening a new division or improving the system, companies prefer to acquire companies to speed up the process of gaining expertise.
Usually the advantage desired is technological expertise. It is also advantageous in increasing the revenue and attain higher utilization rates of resources. It is also referred to as bolt on acquisition.
Example: A company providing financial services wanting to expand its base to equity research acquires a relatively small but fast growing firm in equity research in order to save time required in maturing in equity research. The acquiring firm has a completely functional division within it from day 1 of acquiring. Also the cost of acquiring the firm is recovered by additional revenues brought in which are higher.