Understanding Business Acquisition

The process of acquiring a company for the purpose of building on it's strengths or weaknesses is known as business acquisition. The desired result of business acquisition is to develop and grow the business in a more profitable and faster manner than allowed by it's natural growth. While a business merger is similar to an acquisition, it is a more strict method of combining two businesses into a single and stronger business.

After defining the type of business that would make a good acquisition, usually businesses within the same or a similar market, target businesses are approached to determine their interest. If the target business is interested then the financial state of the business is determined by performing due diligence. Upon the agreement of financial terms for the acquisition, a contract is signed and the "merger" portion commences. Different attributes of the two businesses are evaluated, such as personnel, processes and products. Attributes that overlap between the two companies, and those that perform well, are retained. The less desirable attributes are cut.

While a "single" business acquisition involves the purchase of the assets and operations of one company by another, a "split and sell" acquisition refers to purchasing a business for the reason of gaining a small number of pieces of that business. In the former, duplicated and unnecessary pieces of the business are simply discarded, while in the latter, excess pieces may be sold to reclaim some costs of the acquisition.