A prevalent acquisition strategy example in the business area

A prevalent acquisition strategy example in the business area

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

Prior to diving into the ins and outs of acquisition strategies, the initial thing to do is have a firm understanding on what an acquisition actually is. Not to be confused with a merger, an acquisition is when one company purchases either the majority, or all of another company's shares to gain control of that company. Generally-speaking, there are around 3 types of acquisitions that are most popular in the business sector, as business individuals like Robert F. Smith would likely recognize. Among the most standard types of acquisition strategies in business is called a horizontal acquisition. So, what does this suggest? Basically, a horizontal acquisition entails one company acquiring an additional 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. Typically, they may even be considered 'competitors' with each other. Generally, the primary advantage of a horizontal acquisition is the increased potential of raising a business's customer base and market share, as well as opening-up the possibility to help a business grow its reach into new markets.

Amongst the numerous types of acquisition strategies, there are two that people commonly tend to confuse with each other, probably because of the similar-sounding names. These are referred to as 'conglomerate' and 'congeneric' acquisitions, which are two rather independent strategies. To put it simply, a conglomerate acquisition is when the acquirer and the target firm are in completely unrelated sectors or engaged in different activities. There have actually been lots of successful acquisition examples in business that have involved two starkly different businesses with no overlapping operations. Usually, the purpose of this technique is diversification. For example, in a scenario where one service or product is struggling in the current market, firms that also own a diverse variety of other product or services have a tendency to be more secure. On the other hand, a congeneric acquisition is when the acquiring business and the acquired company belong to a similar sector and sell to the same kind of customer but have relatively different products or services. Among the primary reasons why businesses may decide to do this type of acquisition is to simply expand its line of product, as business people like Marc Rowan would likely verify.

Many individuals assume that the acquisition process steps are constantly the same, no matter what the firm is. However, this is a standard misunderstanding due to the fact that there are actually over 3 types of acquisitions in business, all of which come with their very own procedures and strategies. As business individuals like Arvid Trolle would likely confirm, 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 company acquires another business that is in an entirely different position on the supply chain. As an example, the acquirer company might be higher on the supply chain but decide to acquire a business that is involved in a key part of their business procedures. On the whole, the beauty of vertical acquisitions is that they can bring in brand-new income streams for the businesses, in addition to decrease prices of production and streamline operations.