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What is an acquisition?

An acquisition is when one company buys a majority or all the shares of another company, gaining control. The control threshold is 50% or more of a company’s shares.

Although large-scale acquisitions of well-known companies tend to dominate the news, mergers and acquisitions between small and medium-sized firms are a lot more common.

There are 3 ways to gain control of a company:

  • An acquisition, often considered the friendly way
  • A takeover, often considered the hostile way
  • A merger, which creates a new company by combining the previous two

Mergers and acquisitions happen for various reasons, including to:

  • Gain economies of scale
  • Provide additional diversification
  • Gain greater market share
  • Increase corporate synergy
  • Reduce costs
  • Provide access to new technology or products

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