[a-kwa-‘zi-shan]
A purchase of some or all of a company's shares by one party, which may result in consolidation or merger with the parent company.
What is an Acquisition Definition?
An acquisition happens when one company buys most or all of another company's shares to take over control of that company. If the acquirer purchases over 50% of the target firm's stocks and assets, they can make decisions about the newly acquired assets without the agreement of the other shareholders. If the target company agrees to the acquisition, it's a friendly takeover, and there's usually a no-shop clause in place during the process.
However, when a company is purchased without its consent, usually by buying a majority amount of its shares to gain a controlling stake, it's called a hostile takeover.
Key Takeaways
- An acquisition takes place in the business world when a company purchases the majority or all of another company's shares.
- When a firm acquires over 50% of a target company's shares, it attains practical control of the company.
- Acquisitions tend to be friendly, whereas takeovers can be hostile.When two companies merge, they become a completely new company.
- Acquisitions can happen through negotiations between the two companies or with the assistance of investment bankers and other financial professionals.
Example of Acquisition Definition
Acquisition of WhatsApp by Facebook in 2014
The acquisition of WhatsApp by Facebook in 2014 stands out as the best example of a successful acquisition. At that time, WhatsApp had already garnered a massive user base of over 450 million, making it one of the fastest-growing mobile messaging apps in the world.
Facebook's astute recognition of WhatsApp's potential led to its acquisition of the company for a whopping $19 billion, which was paid in both cash and stock. As a result of the acquisition, Facebook was able to expand its user base and improve its presence in the mobile messaging industry, while also gaining access to WhatsApp's technology and user data.
The successful acquisition of WhatsApp by Facebook has been hailed as one of the most significant and profitable acquisitions in the tech sector.
Back to Glossary.
