Glossary term
Acquisition
An acquisition is a transaction in which one company buys control of another company, business, asset, or group of assets.
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What Is an Acquisition?
An acquisition is a transaction in which one company buys control of another company, business, asset, or group of assets. The buyer is often called the acquirer, and the business or assets being purchased are often called the target.
Acquisitions can be friendly or hostile, public or private, strategic or financial. They may be structured as a stock purchase, asset purchase, tender offer, merger, or another legal transaction depending on the parties and goals.
Key Takeaways
- An acquisition occurs when a buyer gains control of a company or asset.
- Deals can be paid for with cash, stock, debt, or a combination.
- Acquisitions may require shareholder, lender, court, or regulatory approvals.
- The buyer takes on integration, financing, valuation, and execution risk.
- Target shareholders should focus on consideration, closing conditions, and deal certainty.
How Acquisitions Work
In a stock acquisition, the buyer purchases shares or equity interests. In an asset acquisition, the buyer purchases specific assets and may assume selected liabilities. In a tender offer, the buyer offers to purchase shares directly from shareholders under defined terms.
The acquisition agreement or offer document explains the price, structure, timing, required approvals, financing, covenants, and termination rights. For public companies, important acquisition information may appear in Form 8-K filings, proxy statements, tender offer materials, or other SEC filings.
Acquisition Structures
Structure | Basic effect |
|---|---|
Stock purchase | Buyer acquires ownership interests in the target. |
Asset purchase | Buyer acquires selected assets and possibly selected liabilities. |
Tender offer | Buyer offers to purchase shares directly from holders. |
Merger | Target combines into the buyer or another entity. |
Valuation and Deal Risk
Acquisitions are often justified by revenue growth, cost savings, market access, technology, customer relationships, talent, tax attributes, or strategic positioning. Those benefits are not automatic. They depend on price, integration, culture, financing cost, and execution.
For investors, the same deal can look different from each side. Target shareholders may care most about premium and deal certainty. Acquirer shareholders may care most about whether the buyer is overpaying or taking on too much debt.
Acquisitions can also reshape financial statements. The buyer may recognize goodwill, intangible assets, transaction costs, new debt, or integration expenses. Those accounting effects can influence reported earnings long after the announcement date.
The Bottom Line
An acquisition is a control transaction. It can create value when the buyer pays a sensible price and executes well, but the financial outcome depends on structure, financing, approvals, integration, and valuation discipline.