Types of Acquisitions

Business is a broad term that includes various forms of business combinations. The acquisition is described as one of the most important concepts of entrepreneurship. It can be expressed as a corporate transaction where a company supposedly purchases a portion or gets all of another company’s assets. The primary objective behind an acquisition is building and taking control of some other company’s strengths. 

Today, we will read about different types of acquisitions in detail. We will be talking about the topic of acquisition in detail, its various benefits, the difference between the acquisition and the merger, and so on. Without wasting any more time, let’s quickly start with the acquisition introduction.

Introducing the term Acquisition 

The term acquisition is referred to as a corporate transaction that is majorly done to get the company’s profit shares targeted. It is done without impacting the brand position. Even after the acquisition, the target company runs in the same manner as before; however, with a change in ownership. At times, the acquiring companies show a higher level of supremacy while working; however, it’s not the same as in the case of a merger, as the controlling body changes here. 

In simple terms, acquisition can be defined as a method of inter-corporate investing. However, there are different types of acquisitions based on several factors, such as the nature of performing the business of the two involved companies. Apart from this, there are other classifications that we will discuss further in the article.

Different Types of Acquisitions 

There are mainly four types of acquisitions:

• Horizontal Acquisition

The horizontal acquisition is when a company decides to acquire another company from a similar sector or industry. A common example of it is Facebook acquiring WhatsApp. Although Whatsapp still exists as a brand; however, it is now owned by Facebook. Since both belong to the same sector, the acquisition has benefited both. 

• Vertical Acquisition

The next is a vertical acquisition which means a company acquiring either a distributor of its products or an inputs supplier which already sells a ton of products. One common example is a garment manufacturing company acquiring silk or a cotton farm.

• Conglomerate Acquisition

When any company decides to get a completely different company from what they are presently dealing in, a conglomerate acquisition takes place. Its major purpose is diversification. The most common example of conglomerate acquisition is when a clothing company expands into the food industry. 

• Congeneric Acquisition

A congeneric acquisition occurs when the same companies form a single unit or come together. This terminology exists and is practised widely. For example, when the banking giant Citicorp merged with the financial services company Travellers Group in 1998.

Advantages of Acquisitions

• Reduction in the entry barrier 

Every time a company decides to acquire, they enter a completely new world and product lines along with a brand that is already the master of that field and has a good reputation in the market. As a result, the challenging entry barrier gets reduced. 

• Market power 

With the acquisition, you can readily increase your company’s market share. Also, it provides a healthy competitive edge against the most challenging competitors. 

• New competencies and resources 

At times, you may lack resources and competition. By taking over other businesses, you can add new competencies and resources that earlier weren’t possible. 

• Access to the expert 

Every time a small business joins hands with a large organisation, they get easy access to experts and specialists. 

• Access to increased capital 

Small business owners usually take a step back when it comes to capital; however, after joining hands with big companies or organisations, it is easier to get access to more capital that can further contribute to growth. 

• Fresh ideas 

After the acquisition, you are often placed in a team of new minds who possess a completely different perspective to overview things and give fresh ideas. 

Disadvantages of Acquisitions 

It is believed that acquisition is a great way to empower your business and acquire more significant revenues. Let’s have a look at some of the disadvantages of acquisition: 

• Damage to the existing brand’s image 
• Poorly matching business 
• Culture clashes
• Conflicting objectives 
• Pressure on suppliers 
• Duplication 

Conclusion 

With this, we end our study material on different types of acquisitions. An acquisition is one of the most exciting topics of entrepreneurship. An acquisition can be described as a corporate transaction that is mainly done to get the profit shares of the targeted company without affecting its autonomy or the overall brand positioning. Both mergers and acquisitions are designed and constructed differently.