what is an acquisition premium 
an acquisition premium is a figure that s the difference between the estimated real value of a company and the actual price paid to acquire it an acquisition premium represents the increased cost of buying a target company during a merger and acquisition m a transaction there is no requirement that a company pay a premium for acquiring another company in fact depending on the situation it may even get a discount understanding acquisition premiumsin an m a scenario the company that pays to acquire another company is known as the acquirer and the company to be purchased or acquired is referred to as the target firm typically an acquiring company will pay an acquisition premium to close a deal and ward off competition an acquisition premium might be paid too if the acquirer believes that the synergy created from the acquisition will be greater than the total cost of acquiring the target company the size of the premium often depends on various factors such as competition within the industry the presence of other bidders and the motivations of the buyer and seller in cases where the target company s stock price falls dramatically its product becomes obsolete or if there are concerns about the future of its industry the acquiring company may withdraw its offer 