Acquisition

An acquisition means that one company takes over another company in whole or in part. This usually happens by buying a majority of the shares or acquiring key assets. The goal is to gain control over the acquired company.

Two routes are common: in a share deal, ownership of the shares changes. The company retains its assets, contracts and liabilities, although individual contracts may require consent to a change of control. In an asset deal, selected assets and, where agreed, liabilities are transferred. Unlike a statutory merger, an acquisition does not require the buyer and target to become a single legal entity. What matters is which business activities and decision-making rights pass to the buyer. An ownership stake below 100 percent can be sufficient. A minority investment can also form part of an acquisition strategy.

The process follows a settled pattern of approach, confidentiality agreement, indicative offer, due diligence, negotiation, signing and closing. The price is usually negotiated as an enterprise value on a cash-free debt-free basis and converted into the payable equity price via the equity bridge.

Whether an acquisition creates value is decided less in the contract than in integration, because planned synergies only materialise through execution and integration costs are routinely underestimated. The identity of the acquirer also shapes the process: a strategic buyer often considers synergies with its existing business. A financial sponsor focuses on value creation and a later exit, and may also combine the target with other portfolio companies. The two groups bring different requirements on diligence depth, warranties and timetable. In a business succession sale, transition arrangements for the outgoing owner and the retention of key people are regularly negotiated alongside the price itself.