Acquisition is the process by which a company takes over another entity to become a part of it. This is a common way for companies to expand into new markets, increase market share, and gain access to new technologies or intellectual property. During the acquisition process, it’s important to take a thorough approach that considers all aspects of the target business.
The most common reason that businesses pursue acquisition is for strategic expansion. It is a faster, less risky method for expanding a company than increasing its market share through traditional sales and marketing efforts. Additionally, it can provide a shortcut into growth that would have otherwise taken years to achieve organically.
There are several types of acquisition that a business may engage in. For example, a horizontal acquisition occurs when one company buys a competitor in the same industry, which can lead to an increase in market share and eliminate competition. However, this type of acquisition can also result in higher prices and lower-quality products, which is why federal watchdogs keep a close eye on such deals.
Alternatively, vertical acquisitions occur when a company purchases a business that falls in a different position on the supply chain, such as a supplier or manufacturer. This can help the purchasing company save money by reducing its dependence on external vendors and may improve the quality of its products.