An acquisition deal is a transaction whereby one business buys and takes control of another business. It can take many forms including a company buying a majority of the ownership shares of another, or a company acquiring all the assets of a business such as its customer lists, brands, property, trademarks and other tangible items. Typically, the company pursuing the acquisition will send a letter of intent to the target business outlining their proposed terms of an agreement for the potential purchase. Then the two companies will begin negotiations to determine the purchase price and payment structure. The negotiations will also cover other transaction details like future liabilities, warranties and indemnifications among others.
A company makes an acquisition to increase its market share, improve its operating efficiency, or eliminate competition. The acquiring company may need to buy out the existing shareholders of the target business or obtain the approval of its board and shareholders before completing the acquisition. A hostile takeover, in which the acquiring company tries to acquire enough shares of the target company to control it against its will, is considered illegal by most governing bodies.
After the letter of intent is sent, the next step is to identify a suitable financing partner. Negotiations will then begin to finalize financing terms such as interest rates, repayment schedules and collateral requirements. It is common for the acquiring business to seek the help of an expert M&A advisor to navigate the process.
About the Author
