Acquisition

In an acquisition, the buyer, often called the acquirer, takes control of the target company. The target may continue to operate as a separate business owned by the acquirer, or it may be fully integrated into the acquirer's operations.

Acquisitions can be paid for in cash, with the acquirer's own shares, or a combination of both. They can be friendly, when the target's board supports the deal, or hostile, when the acquirer makes an offer directly to shareholders against the board's wishes.

For example, a large technology company might acquire a small start-up for its software and engineering team, paying cash to the start-up's shareholders.

Acquirers often pay a premium above the target's current market value to persuade shareholders to sell. They justify this by expecting synergies, such as cost savings or increased revenue, from combining the businesses.

Acquisitions carry significant risks. The acquirer may overpay, synergies may prove smaller than expected, integration may be difficult, and key staff or customers may leave. For this reason, careful due diligence and integration planning are essential parts of the acquisition process.