what is an acquisition 
an acquisition is a transaction in which one company purchases most or all of another company s shares to gain control of that company acquisitions are common in business and may occur with or without the target company s approval there s often a no shop clause during the process of approval most people commonly hear about the acquisitions of large well known companies but mergers and acquisitions m a occur more regularly between small to medium sized firms than between large companies sydney saporito investopediaunderstanding acquisitionsan acquisition is a financial transaction that occurs when one business acquires the majority or all of its target s shares the goal of an acquisition is to gain control of the target s operations including its assets production facilities resources market share customer base and other elements companies acquire other businesses for various reasons they might seek economies of scale diversification greater market share increased synergy cost reductions or new niche offerings they might simply want to cut out the competition acquisitions are usually friendly endeavors they occur when the target firm agrees to be acquired its board of directors approves of the deal friendly acquisitions often work toward the mutual benefit of both the acquiring and target companies both companies develop strategies to ensure that the acquiring company purchases the appropriate assets and they review the financial statements and other valuations for any obligations that may come with the assets the purchase proceeds when both parties agree to the terms and meet any legal stipulations purchasing more than 50 of a target firm s stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company s other shareholders special considerationsa company must evaluate whether its target company is a good candidate acquirers may have to consider some key steps before pondering whether they should go through with a deal reasons for acquisitionsbuying an existing company in another country could be the easiest way to enter a foreign market if a company wants to expand its operations to that country or a totally new market the purchased business will already have its own personnel a brand name and other intangible assets this could help to ensure that the acquiring company will start off in a new market with a solid base perhaps a company met with physical or logistical constraints or depleted its resources it s often sounder to acquire another firm than to expand its own when a company is encumbered in this way such a company might look for promising young companies to acquire and incorporate into its revenue stream as a new way to profit companies may start making acquisitions to reduce excess capacity eliminate the competition and focus on the most productive providers when there s too much competition or supply federal watchdogs often keep an eye on deals that may affect the market acquisitions between two similar companies may harm consumers including higher prices and lower quality goods and services 1sometimes it can be more cost efficient for a company to purchase another company that has already implemented a new technology successfully than to spend the time and money to develop the new technology itself officers of companies have a fiduciary duty to perform thorough due diligence of target companies before making any acquisition acquisition vs takeover vs mergeracquisition and takeover mean almost the same thing but they have different nuances on wall street an acquisition generally describes a primarily amicable transaction in which both firms cooperate a takeover suggests that the target company resists or strongly opposes the purchase the term merger is used when the purchasing and target companies mutually combine to form a completely new entity but the exact use of these terms tends to overlap in practice because each acquisition takeover and merger is a unique case with its own peculiarities and reasons for undertaking the transaction unfriendly acquisitions are commonly known as hostile takeovers they occur when the target company doesn t consent to the acquisition hostile acquisitions don t have the same agreement from the target firm so the acquiring firm must actively purchase large stakes of the target company to gain a controlling interest this forces the acquisition it implies that the firms aren t equal in one or more significant ways even if a takeover isn t exactly hostile a merger is the mutual fusion of two companies into one new legal entity so it s a more than friendly acquisition this deal generally occurs between roughly equal companies in terms of their basic characteristics including their size customer base and scale of operations the merging companies strongly believe that their combined entity would be more valuable to all parties especially shareholders than either one could be alone example of acquisitionsaol was the most publicized online service of its time extolled as the company that brought the internet to america founded in 1985 it grew to become the united states largest internet provider by 2000 2 meanwhile the legendary media conglomerate time warner was being labeled an old media company given its range of tangible businesses like publishing and television and an enviable income statement the young upstart aol purchased the venerable giant time warner for 165 billion in 2000 in a masterful display of overweening confidence the deal dwarfed all records and became the biggest merger in history 3the vision was that the new entity aol time warner would become a dominant force in the news publishing music entertainment cable and internet industries aol became the largest technology company in america after the merger but the joint phase lasted less than a decade the expected successes of the merger failed to materialize as aol lost value and the dotcom bubble burst aol and time warner dissolved their union at t and time warner announced that at t would buy time warner for 85 4 billion in october 2016 morphing at t into a media heavy hitter at t completed the acquisition in june 2018 after a protracted court battle 5the at t time warner acquisition deal of 2018 was as historically significant as the aol time warner deal of 2000 the u s department of justice sought to end the deal saying the acquisition would hurt competition leading consumers to face higher fees and bills 6the government lost its appeal in court and dropped the lawsuit at t decided to spin off its media assets including time warner despite this 7