An acquisition deal is a purchase of shares or assets in one company by another. Acquisitions are generally done to improve a business’ growth or increase its market share. It can also be done to cut costs or access new technologies. The motives vary from business to business but growth is always the key driver.
The most important benefit of an acquisition is the creation of new revenue streams for both the purchasing and selling sides. In the case of the buy-side, this may be a new market or location in which to operate. Alternatively, it could be an additional line of products or services. In the case of the sell-side, it is usually a significant injection of capital that can allow them to expand operations without having to invest their own cash.
Aside from new revenue streams, an acquisition can bring a number of other benefits to both the purchasing and selling side of the transaction. For the purchase-side, it can provide access to a large pool of knowledge from the employees and executives of the acquired company. This can help the organization grow faster by providing them with expertise that they wouldn’t otherwise have available.
Aside from the benefits listed above, acquisitions can also make it easier for smaller companies to access the funding they need to grow. This can be in the form of equity or debt financing and will often be outlined in a Share Purchase Agreement (SPA) or Assets Purchase Agreement (APA). When deciding to pursue an acquisition it is important to evaluate whether the deal makes sense for your organization and will align with your long-term goals.
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