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Acquisition: Get to Know its Type

Are you familiar with the acquisition? The acquisition is very familiar among business companies. This is because acquisitions in business are common. A company can make acquisitions with other companies so that the business development growth rapidly increases. In addition, a company is making acquisitions to expand the market. This article will give insight for readers about acquisitions and types of acquisitions.

Acquisition Definition

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Talking about the acquisition definition. The experts have expressed their opinion about acquisition definition. M.A. Weinber said that acquisition is a transaction or a series of transactions whereby a person “individual, group of individuals, or company” acquires control over the assets of a company, either directly by becoming the owner of those assets, or indirectly by obtaining control of the management of the company.

Meanwhile, Charles A. Scharft said that acquisition is a transaction in which the buyer (company) obtains part or all of the assets or business of the seller (another company), or all or part of the shares or other securities of the seller, where the transaction is carried out based on agreement, between the buyer and the seller. But in general, acquisition can be defined as a condition where a company buys most or all of an entire company’s shares to take control.

Acquisition Benefit

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Companies that make acquisitions will get some benefits. First, it can be an alternative to the company’s development plan in entering the foreign market. Companies can make acquisitions to companies that already operate in the host country and have a good record. Then the second benefit is to bring new technology. This is an opportunity for the company to increase profits. Third, it can be a company growth strategy. This becomes a solution for companies that experience logistical and resource procurement constraints. The last benefit of acquisitions is reducing the competition between companies. 

Also read: Business Plan: Definition, Benefits, and How to Make it Before Building a Business

Advantages of Acquisition

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Acquisitions have various advantages. First, in shares acquisition does not require a shareholder vote as well as a shareholder meeting. This means that shareholders who are not suitable for the bidding firm can hold their shares and not be traded to the bidding firm. Furthermore, the buyer company that does the tenders offer does not need to seek approval from the company’s management. This is because the buyer’s company deals with the shareholders of the purchased company. 

The next advantage is that the share acquisition can be used in a company takeover categorized as a hostile takeover. This is because there is no need for approval from the commissioner and company management. Last but not least, asset acquisitions require a shareholder vote but do not require a majority of shareholder votes, so it does not become an impediment to minority shareholders if they disapprove.

Disadvantages of Acquisition

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Acquisitions have some disadvantages. First, a merger will occur when the buyer’s company takes over the entire company share. Second, asset acquisition is legally required to reverse the name on each asset purchased. Of course, this requires a high legality fee. Last, the acquisition will be canceled if the minority shareholders disagree with the takeover.

Also read: Stakeholder is: Definition, Types, Functions, and Analysis

Classifications of Acquisition

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There are two classification of acquisitions. The first classification is based on the object. Meanwhile, the second classification is based on the related types of business. Here is the explanation of each classification:

Based on acquisition object

Based on the object, there are three types of acquisition such as merger or consolidation, share acquisition, and asset acquisition.

Here is the explanation of each type:

Merger and Consolidation

A merger can be defined as the process of merging two or more companies into one company. If doing the merger, then the results will use one of these companies’ names. Meanwhile, consolidation has almost the same definition as a merger but different in the use of the company name. The consolidation results will use the new name that represents all companies involved.

Share Acquisition

The meaning of this term is as a takeover activity of another company by buying shares of the company. The buyer’s company can buy it in cash or replace it with shares.

Asset Acquisition

The meaning of this term is as the activity of a company in acquiring another company by the mechanism of buying assets from that company. It aims to avoid the company against minority shareholder ownership.

Based on the related types of business

In this classification, it is divided into three types. There are horizontal, vertical, conglomerate acquisitions. Here is an explanation of each type in this classification:

Horizontal Acquisition

This term means an activity by a company in taking over another company with the same type of business. Companies can reduce the level of competition between competitors through these types.

Vertical Acquisition

The meaning of this term is the activities by a company in taking over another company that still exists in the same production chain. Companies can secure the supply of goods through this. So, the company will get the certainty of goods supply.

Conglomerate Acquisition

This term is an activity by a company in taking over another company that is not related to other companies, both vertical or horizontal. This acquisition aims to increase the portfolio of the group of companies and increase company growth.

Conclusion

Acquisitions are familiar among companies and businesses. A company, through acquisitions, can expand its market and reduce the level of company competition. Of course, the acquisitions that a company makes are based on consideration and also careful planning.

HashMicro, as a leading ERP software provider company, provides convenience in operations management for companies that have recently made an acquisition. Various modules with top features are possible to ease your company’s operations activity. Contact us to get the best offer and free demos.

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