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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Acquisitions are the purchase a controlling stake in another company by purchasing 51 percent or more of its voting shares with cash, stock, or a combination of the two.
Mergers and acquisitions are two closely related terms and are often listed together on a company's balance sheet as mergers and acquisitions (M&A). But there is an important distinction between these terms - in a merger, two companies become one and both original companies cease to exist; in an acquisition, the acquired company is absorbed by the acquiring company, and only the acquired company ceases to exist.
An acquisition, also sometimes called a takeover or buyout, usually involves the takeover of a smaller firm by a larger one. But there are occasions when a smaller firm will obtain the management control of a larger company, and in these cases the smaller acquiring firm will often keep the existing company name and brand in place for the new, combined company. Takeovers or acquisitions can be friendly, where the management of the company to be acquired negotiates a deal with the acquiring company; or, they can be hostile, where the takeover is made despite opposition by the company's management or an offer is made without prior knowledge by the company's board of directors.
Examples
An acquisition can be carried out in one of two ways:
- The acquiring company buys the shares of the acquired company and obtains ownership control.
- In April 2009, Oracle (ORCL) announced that it would buy Sun Microsystems (JAVA) for $7.4 billion in cash.
- The acquiring company buys the assets of the acquired company, and the cash that the acquired company receives in return is paid to shareholders through a divided or by liquidating the company. If the acquiring company buys the entire assets of the acquired company, this leaves the acquired company as an empty shell which is eventually liquidated or enters another line of business.
- In March 2009, OneWest Bank Group LLC, a private holding company, acquired the assets of IndyMac Bancorp (IMB) from the Federal Deposit Insurance Corporation (FDIC), which had taken control of the failed bank in the aftermath of the subprime lending crisis.
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