Acquisition is a word used in relation to mergers. An acquisition it may also be referred to as a takeover.
Acquisitions may be considered friendly or hostile. In the case of a friendly acquisition, both companies work together during the negotiation period in order to reach a suitable arrangement. In the case of hostile takeovers, on the other hand, the target company may not be immediately aware that it is being targeted, or it may be against the arrangement.
Both mergers and acquisitions function to combine the resources of two companies for the purpose of improving products and services. However, other reasons for mergers and acquisitions may also be to develop a stronger company which will knock out the competition, as well as help ensure greater financial stability for the companies involved.
Oftentimes, larger firms buy out smaller firms. However, the opposite can also happen. Reverse takeovers take place when a smaller company takes charge of managing a larger company. In this case, the smaller firm also maintains its own name.
Vertical acquisitions take place between two companies from the same field or industry. Although they may belong to the same industry, these companies may have different characteristics or may be catering to different needs within the same field. In this case, the acquisition creates a bigger company that is more diverse and better able to provide enhanced goods or services.
On the other hand, horizontal mergers involve companies which produce the same type of product or offer the same service. In this case, the main focus of the merger is the creation of a larger company more capable of taking a bigger chunk of the market.
