A frequent acquisition strategy example in the business field

A frequent acquisition strategy example in the business field

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When two businesses go through an acquisition, it is likely that they will do one of the following strategies

Before diving into the ins and outs of acquisition strategies, the first thing to do is have a firm understanding on what an acquisition truly is. Not to be mixed-up with a merger, an acquisition is when one firm purchases either the majority, or all of another firm's shares to gain control of that firm. Generally-speaking, there are about 3 types of acquisitions that are most typical in the business industry, as business people like Robert F. Smith would likely understand. One of the most usual types of acquisition strategies in business is known as a horizontal acquisition. So, what does this mean? Essentially, a horizontal acquisition entails one company acquiring a different business that is in the exact same market and is performing at a similar level. The two businesses are primarily part of the very same market and are on an equal playing field, whether that's in manufacturing, financing and business, or farming etc. Usually, they may even be considered 'competitors' with one another. Overall, the major benefit of a horizontal acquisition is the increased capacity of increasing a firm's consumer base and market share, in addition to opening-up the opportunity to help a firm widen its reach into new markets.

Amongst the countless types of acquisition strategies, there are 2 that people tend to confuse with each other, probably because of the similar-sounding names. These are known as 'conglomerate' and 'congeneric' acquisitions, which are 2 really separate strategies. To put it simply, a conglomerate acquisition is when the acquirer and the target firm are in totally unrelated markets or engaged in separate ventures. There have been many successful acquisition examples in business that have included two starkly different businesses without any overlapping operations. Usually, the purpose of this technique is diversification. For example, in a circumstance where one services or product is struggling in the current market, businesses that also have a diverse variety of other product or services have a tendency to be more steady. On the other hand, a congeneric acquisition is when the acquiring company and the acquired business belong to a similar sector and sell to the same type of consumer but have slightly different service or products. One of the primary reasons why businesses may opt to do this kind of acquisition is to simply broaden its line of product, as business people like Marc Rowan would likely confirm.

Many individuals assume that the acquisition process steps are constantly the same, whatever the company is. Nevertheless, this is a common mistaken belief due to the fact that there are actually over 3 types of acquisitions in business, all of which come with their own operations and approaches. As business people like Arvid Trolle would likely verify, among the most frequently-seen acquisition strategies is referred to as a vertical acquisition. Basically, this acquisition is the polar opposite of a horizontal acquisition; it is where one firm acquires another company that is in a totally different place on the supply chain. As an example, the acquirer company may be higher up on the supply chain but opt to acquire a firm that is involved in a key part of their business operations. Generally, the appeal of vertical acquisitions is that they can generate new income streams for the businesses, in addition to decrease costs of production and streamline operations.