√ Definition of Acquisition, Types, Benefits, Process, Strengths and Weaknesses
Definition of Acquisition, Types, Benefits, Process, Strengths and Weaknesses – On this occasion we will discuss Acquisition. What is an acquisition, its types, benefits, how is the acquisition process, what are the advantages and disadvantages of the acquisition? We will discuss it in full and of course easy to understand.
Definition of Acquisition, Types, Benefits, Process, Strengths and Weaknesses
For more details, follow the review below carefully.
Definition of Acquisition
According to Wikipedia Acquisition is the purchase of a company by another company or by a group of investors. Acquisition comes from a word in English, namely acquisition, which means takeover.
Another definition of acquisition is a business combination in which one company gains control of the assets netto and operations of the acquired company by giving away certain assets, recognizing an obligation or issuing share.
An acquisition is usually carried out by large companies in business such as some time ago Microsoft acquired Nokia's central business, Lenovo acquired Motorola and others.
Types of Acquisition Types
According to Damodaran (2001), a company can be acquired in several types, namely:
Mergers
Merger, the directors of both parties have agreed to join with the approval of the company's shareholders. Generally, this merger is approved by at least 50% of the shareholders of the target firm and the bidding firm.
Consolidation
After the merger or merger process is complete, a new company will be created and the shareholders of both parties will receive new shares in this company.
Tender Offers
A tender offer is when a company buys outstanding shares from another company without the approval of the target firm's management, and is called a tender offer because it is a hostile takeover. The firm's target will remain as long as there are resistance to bids. Most tender offer processes turn into mergers because the bidding firm manages to take over control of the target firm.
Acquisition Of Assets
A company buys the assets of another company through the agreement of the firm's target shareholders.
Meanwhile, based on the type of companies joining, acquisitions can be divided into 3 types:
Horizontal Acquisition
Is the process of acquisition or takeover of the power of a company by another company that has the same business.
Vertical Acquisition
Is the process of acquiring or taking over ownership of most of the shares of the supplier company or taking over customers from the company being acquired.
Conglomerate Acquisition
Is the process of acquiring or taking over the ownership of most of the shares, assets, or a company that is not the same type of business.
Acquisition Benefits
According to Shapiro (1991:1993) in Christina (2003:12) the benefits or advantages of acquisitions are:
- Promotes a faster growth rate in the business now than growing internally.
- Reducing the level of competition by buying several business entities to combine market forces and limit competition.
- Make impenetrable new sales and current marketing
- Providing managerial skills, namely managerial assistance in managing business entity assets.
Acquisition Process
In the acquisition process there are 3 ways that can be used. This process is carried out by merging the 2 companies into one company. In the process of a merger or takeover, the bidding firm will remain in existence with its name and identity and acquire all the assets and liabilities of the target firm.
Whereas in consolidation a new company will be formed where both parties will receive new shares from the new company. The next process is the acquisition of stock, namely the acquisition process by buying voting stock from the company such as shares or securities in cash.
This process can be carried out by a company by bidding on other companies. While the last acquisition process is the acquisition of assets, namely by buying all of the company's assets.
Advantages of Acquisition
In a company acquisition there are advantages, namely:
- In the acquisition of shares does not require a meeting of shareholders and shareholder votes so that if the shareholders shares do not like the bidding firm's bid, they can hold their shares and not sell to the bidding party firm.
- In the acquisition of shares, the buying company can directly deal with the shareholders of the purchased company by means of a tender offer process so that no approval from the company's management is required.
- Because it does not require the approval of the company's management and commissioners, the acquisition of shares can be used for hostile takeovers of companies.
- Asset acquisition requires shareholder vote but there is no barrier for minority shareholders if they do not approve the acquisition. (Harianto and Sudomo, 2001, p.643)
Lack of Acquisition
The disadvantages of an acquisition are:
- If enough minority shareholders do not approve of the takeover, the acquisition will be void. In general, the company's articles of association determine at least two-thirds (about 67%) of the votes in favor of an acquisition for the acquisition to occur.
- If the company takes over all the shares purchased, a merger occurs.
- Basically, the purchase of assets in acquisitions must be legally reversed, resulting in high legal costs (Harianto and Sudomo, 2001, p.643)
Thus has been explained about Definition of Acquisition, Types, Benefits, Process, Strengths and Weaknesses, hopefully can add to your insight and knowledge. Thank you for visiting
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