Acquisition is the process that businesses follow to buy or otherwise take control of another company or business. It typically involves assessing the target, negotiating, and securing approval from regulatory authorities. Acquiring companies can use acquisition to accomplish a number of strategic goals, such as gaining market share or eliminating competition. In most cases, an acquirer must pay a premium over the value of a target’s stock to gain control. The most successful acquisitions have well-articulated, specific ideas for how they will create value.
Many business owners view acquisition as a faster and less risky way to achieve their objectives than building capabilities internally. If, for example, a business wants to expand into new markets but lacks the resources or capabilities, it can purchase a promising startup and accelerate its growth. Other reasons for acquiring can include removing excess capacity, gaining access to valuable intellectual property, reducing the time and cost of creating products, and achieving economies of scale.
Once a company has decided to make an acquisition, it should set timelines to complete the process. These can be broad goals that span several months or years, or more narrow objectives that can be broken down into more manageable chunks like identifying targets, completing due diligence, executing contracts, and integrating acquired assets. In addition, the company should have dedicated personnel to oversee the M&A process, such as a board member or new hire with a focus on M&A or a consultant who is an expert in this area.