What is an acquisition in business is often a question for those who are just learning about business. Even though it is an important process to be able to save a company. On the other hand, it also helps companies that do so develop to be bigger. If you want to know about this further, including the acquisition meaning and the advantages and disadvantages, you should see the information provided below.
What Is Acquisition?
To answer what an acquisition is, the first thing to understand is the meaning of acquisition. In general terms, acquisition is an attempt to buy shares or assets of a company. So this can make the company that makes the acquisition control the company being acquired.
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What is the Purpose of the Acquisition?
What is acquisition (source: Freepik).
Acquisition is a process that has an important purpose. Usually, this process is carried out because it wants to achieve the objectives listed below.
1. Looking for Opportunities to Enter New Markets
One of its objectives is to enter new markets. Many companies are looking to enter a different industry. For example, when an IT company takes over a pharmaceutical company. This helps IT companies gain market share from new industries.
2. Getting Business Consumers from the Acquired Company
Every company that makes an acquisition certainly wants to get more consumers. By making an acquisition, the company can obtain business customers from the acquired company.
3. Increase Company Profit
Another goal is to increase company profits. This is a goal that is often targeted when making acquisitions. So that the company’s profits can increase after the acquisition.
4. Getting New Technology
Sometimes the goal also includes a desire to acquire new technology. Usually, a company’s technology cannot be shared with other companies. But with this acquisition process, it allows the acquiring company to acquire the technology used by the acquired company.
5. Exchange Knowledge
Another goal is for knowledge exchange. There’s a lot of new knowledge that can be gained, especially if it is made by a company engaged in the same field.
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Type of Acquisition
There are several general types of acquisitions. Broadly speaking, these types are differentiated based on the object and type of business. In more detail, here are some explanations about the types of acquisitions.
Type of Acquisition by Object
The first is type based on the object which is divided into stock type and asset type. Here are the details of the description:
1. Share Acquisition
Acquisitions are carried out by taking over shares or buying most of the shares of the company to be acquired. Usually this is done in two ways, the first is by buying shares in cash. Meanwhile, the next method is through the exchange of shares with other securities.
2. Asset Acquisition
This is a process that is carried out by buying company assets. So that company ownership can be taken over easily.
Type of Acquisition By Business Type
Next is the type of acquisition based on the type of business which is divided into three types, namely horizontal, vertical, and conglomerate acquisitions. The explanations are as follows:
1. Horizontal Acquisition
This is done by companies that have the same business field. Where the goal is to protect the company from similar competitors in the market.
2. Vertical Acquisition
This is done by the company for its distributors. Usually aims to maintain the quality of the product supply chain to remain the best.
3. Acquisition of Conglomerates
This is done by companies with different business lines. It is generally done to provide a better portfolio to the acquired company. So that the company can develop to be better in the competition in the market.
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Advantages and Disadvantages of Acquisition
Acquisition meaning (source: Freepik).
There are several advantages and disadvantages of acquisitions that should be considered. Especially if an entrepreneur is thinking about making an acquisition. Starting from the advantages which include the following:
- – The number of administrative requirements that must be taken care of tends to be less, which makes it easier for entrepreneurs.
- – Companies that have been taken over will be retained.
- – Does not require approval from company management because the buying company will directly relate to the majority shareholder.
- – Although the majority shareholder’s vote is very important in the asset acquisition process, minority shareholders can still have an opinion if they do not agree.
In addition to the advantages, of course, there are disadvantages. Such as the following:
- – The costs incurred in the company’s legalization process tend to be higher.
- – Possible merger if all shares are bought by another company.
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Acquisition Examples
Of course, acquisitions are a common occurrence in business. An example that has made big news is Danone’s acquisition of Aqua. Where this is done to help Aqua grow to face new competitors in the market. Another example is what BenQ did for Siemens. BenQ buys most of Siemens shares to keep Siemens in the market.
These are some explanations of what an acquisition is, including the definition of acquisition and its types and examples. Through the description above, it is quite clear that the acquisition is an important thing that must be done to save a business. So that if the acquisition is made, then the implementation of the right strategy can also be done easily.
