Acquisitions

Posted in Finance, Accounting and Economics Terms, Total Reads: 1633
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Definition: Acquisitions

Acquisitions come under the purview of corporate growth strategy of a firm and refer to the inorganic way of growing wherein one company acquires at least a controlling stake in another organization. An acquisition is characterized by the fact that after the acquisition the two entities form a new entity and do not exist as separate entities. This is referred to as consolidation.

The acquisitions can be classified in two ways: as public and private or as friendly and hostile.


  • Private acquisition: An acquisition in which the company being acquired (target company) is not listed on a public stock exchange.
  • Public acquisition: An acquisition in which the company being acquired (target company) is listed on a public stock exchange. 


In friendly and hostile takeovers, the difference is only in the way the information is communicated to the target company.

  • Friendly takeover: An acquisition in which the target company expresses an agreement of being acquired.
  • Hostile takeover: An acquisition in which the target company does not explicitly express an agreement of being acquired whereas the acquirer acquires the target by purchasing more and more shares and getting a controlling stake.


Acquisitions generally take place when a company perceives synergies between two companies such that organic expansion seems costlier than the acquisition.

The payment for an acquisition can take place either in the form of cash or stocks of the acquiring company or both.


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