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Acquisition

One company buys control of another, either through an agreed deal with the target's board or directly from shareholders.

Acquisitions are agreed or hostile. An agreed deal runs through a board recommendation and a shareholder vote; a hostile-takeover goes straight to holders through a tender-offer or a proxy-fight. Either way the buyer pays a deal-premium over the pre-announcement price.

For the acquirer's shareholders the question is whether the deal is accretive-dilutive. Acquirer shares often fall on announcement, particularly in an all-stock-deal, because of the dilution and the integration risk.

Example: a buyer offers $6.0B for a target with a $4.4B market cap, a 36% premium. Funding it with new shares at $50 means issuing 120M shares, expanding the buyer's 900M share base by 13%.

Related: merger, hostile-takeover, deal-premium

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