Acquisition is the process by which a business takes over ownership of another company or its assets. This is often done to increase market share, enter new markets, or gain access to technologies and resources that aren’t available internally.
While high-profile acquisitions of large companies make headlines, mergers and acquisitions (M&A) are more common among small businesses seeking to expand their reach or accelerate growth. Many of these transactions are financed through cash transactions or stock exchanges, but pre-approved business loans may also be an option.
The most successful acquisitions are based on sound business strategy and a clear understanding of what is needed from the target company. Thorough due diligence is important to ensure that the target company fits the buying business in terms of product or service line, geographic reach, or culture — and that the asking price adequately reflects the company’s value.
In addition, a comprehensive evaluation of the acquiring business and its management must be conducted to ensure that the company is financially viable and has sufficient capacity to supply additional products or services. This includes determining how the acquisition will impact cost goals, capability or performance standards, and delivery or performance-period requirements. A rushed or poorly executed acquisition can have devastating effects on a business’s ability to grow. For example, a wrongly selected target company could result in an unfavorable cultural fit that leads to operational inefficiencies and employee dissatisfaction.
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