An acquisition is the purchase of one business or company by another company or other business entity. Consolidation occurs when two companies combine together to form a new enterprise altogether,and neither of the previous companies survives independently. Acquisitions are divided into "private" and "public" acquisitions, depending on whether the acquiree or merging company (also termed atarget) is or is not listed on public stock markets. An additional dimension or categorization consists of whether an acquisition is friendly or hostile.
Achieving acquisition success has proven to bevery difficult, while various studies have shown that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome.
Whether apurchase is perceived as being a "friendly" one or a "hostile" depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors,employees and shareholders. It is normal for M&A deal communications to take place in a so-called 'confidentiality bubble' wherein the flow of information is restricted pursuant to confidentialityagreements. In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the board and/or management of the target is unwilling to be bought or the target'sboard has no prior knowledge of the offer. Hostile acquisitions can, and often do, ultimately become "friendly", as the acquiror secures endorsement of the transaction from the board of the acquireecompany. This usually requires an improvement in the terms of the offer and/or through negotiation.
"Acquisition" usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, asmaller firm will acquire management control of a larger and/or longer-established company and retain the name of the latter for the post-acquisition combined entity. This is known as a reverse...
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