Acquisition

What It Means

An Acquisition usually refers to a situation where a majority ownership stake, meaning more than 50% of the equity, in a company is purchased, or acquired, by another party.

Why It’s Important

Acquiring a majority ownership stake in a company ensures that the Buyer will have decision making authority in the business after the sale. It is their business now after all. These changes may or may not align with the previous owner’s strategy or management style. Different buyers are likely to have very different plans and objectives. Strategic Buyers, often larger companies, may want to integrate the business with other operations to reduce costs, which could mean employees lose their jobs or are forced to relocate. Financial Buyers, such as Private Equity firms, look for ways to make the company more valuable and resell it after a few years. Individual Buyers may be purchasing it as an investment or they may plan to be fully involved running the company.

It’s important for a Seller to try to understand a Buyer’s plans, goals, and motivations for the Acquisition. Some Buyers may offer the owner a higher Enterprise Valuation or a more attractive deal structure, but they may have plans that conflict with other priorities the Seller may have, such as taking care of long-term employees.

Related Terms

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Articles

Follow the Money: Sources of Capital Used to Buy a Business

In this article, we will explore some of the more common sources of funding used to purchase a business, along with a few brief but important considerations for both buyers and sellers.

[Updated] Should the election results affect when you sell your business?

[Updated 2023] Governmental control changes hands every few years here in the US, but should shifts in the political winds affect the timing of a sale? The democratic party party seized control of the white house and won a narrow majority in both legislative houses in the 2020 election. We’ll explore a few ways that the election results might affect business owners contemplating an exit, for better and for worse.

What is an “add-back” expense anyway?

Expense add-backs are a common adjustment made to the P&L of companies that are positioned for sale. They are intended to represent expenses that would not have affected the company under different management. Legitimate add-backs can provide a significant boost to a company’s valuation.

5 ways the COVID-19 pandemic might affect the sale of your business

The COVID-19 pandemic has proven to be boom or bust for many businesses. In this article, we’ll explore 5 ways that the resulting economic climate is likely to affect the sale of a business, for better or worse.

Should you hire a business broker to sell your business?

Explore some key questions to ask when considering whether it makes sense to hire a business broker to sell your business.

Acquisition

What It Means

Why It’s Important

Related Terms

Related Posts