An Acquisition is when one company purchases most or all of another company's shares to gain control of that company. Purchasing more than 50% of a target firm's stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company’s other shareholders. Acquisitions, which are very common in business, may occur with the target company's approval, or in spite of its disapproval. With approval, there is often a no-shop clause during the process.The benefits of an acquisition can be significant for both parties involved. The acquiring company typically acquires new customers, products and technology as well as additional market share and scale economies from combining operations with the target firm. For employees at both companies, job security may increase if layoffs are not part of restructuring plans post-acquisition; however this is not always guaranteed especially if cultural differences exist between management teams at each firm post-acquisition.There can be risks associated with acquisitions as well - such as culture clashes between employees (which could lead to decreased productivity), difficulty integrating two disparate IT systems (which could lead to data breaches) and increased debt levels on acquirer’s balance sheets (which could limit its ability to pursue future acquisitions). Management must carefully assess all potential risks before deciding whether or not an acquisition makes sense for their business.
