Acquisition is a business strategy that involves buying shares or assets of another company. The purpose of this type of growth is to gain competitive advantage or capture new energy, either through increased market share or improved profitability.
Many companies use Acquisition to grow quickly in a short amount of time, rather than growing their own revenue through sales and marketing efforts. This is often referred to as M&A (Mergers & Acquisitions).
The most common reason for a company to make an Acquisition is to enter into new markets. For example, a company may need to gain access to a particular country or region because of its location or its target customer base. It would be difficult and expensive to gain this market access through organic growth alone. However, if the company acquires the necessary business assets it can enter a new market quickly and effectively.
Companies may also acquire businesses for defensive reasons. For example, they might want to eliminate future competition or prevent their rivals from becoming too powerful by buying the competition outright. This is a common tactic in highly competitive industries.
When a company considers an Acquisition, it is important to conduct thorough due diligence. This is to ensure that the purchase price of the acquired business is fair and reflects the value of the target business. It is also important to assess the acquired company’s debt load and identify any ongoing or potential legal issues that could impact operations after the purchase.