What Is An Acquisition?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

An acquisition is an action by a corporation to assume control of a target firm. This is done by buying either all or most of the target's ownership stakes. Acquisitions can either be friendly (the target firm agrees to be acquired) or hostile (the target firm does not agree and the acquirer has to buy large amounts of the target to assume control).

Typically acquisitions are undertaken in order to expand into a new sector or to grow within the sector. For example, if a technology firm has a key supplier for an essential part, they may decide to acquire the supplier both to ensure a consistent supply of parts and to reduce the amount available to competitors.

The acquiring company will usually offer a premium to the target company (the difference between the acquisition value and the market value of the target) in order to provide incentive to the existing shareholders to sell and this premium will often be roughly equal to the value of intangible assets and goodwill in the target company.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.