Definition
An acquiree is a company that is purchased or bought out by another company, referred to as the acquirer. In such a transaction, the acquiree company becomes either a subsidiary or part of the acquiring company. This term is commonly used in mergers and acquisitions discussions.
Key Takeaways
- The acquiree is the company that is being taken over or purchased in a business transaction, often known as a merger or acquisition.
- During the process, the acquiree potentially becomes a part of the acquiring or buyer company. The acquiring company could decide to keep the acquiree’s name and brand or integrate the acquiree’s operations into their own.
- The value and attractiveness of an acquiree typically lie in its assets, technology, customer base, or perhaps its market share or its employees’ skills and expertise.
Importance
The finance term “Acquiree” is important because it refers to a company that is being taken over or bought by another company, known as the acquirer.
This transaction is significant in the business world and can greatly affect the landscape of various industries.
In mergers and acquisitions (M&A), the acquiree could represent a strategic opportunity for growth or diversification for the acquirer.
This term is also crucial for stakeholders, including investors and employees, as the acquisition can influence the acquiree’s stock price, operational processes, and corporate culture.
Understanding the role of the acquiree is essential to comprehend the impact and potential benefits or risks associated with M&A transactions.
Explanation
An acquiree refers to a company that is being bought or taken over by another company, also known as the acquirer. In the business world, it is quite common to have instances of corporate takeovers and acquisitions, where stronger companies strategically buy out smaller or equal-sized companies. The primary reason behind this action is to expand their reach, industry dominance, or diversify their operations and services.
The acquiree as an entity potentially holds critical resources or capabilities that the acquirer company intends to harness, making it invaluable in the entire acquisition process. On a larger scale, acquirees can be an essential component in market consolidation, particularly in industries that have many participants. They play a pivotal role in creating significant shifts in market dynamics.
An acquiree can influence a variety of aspects like pricing power, competition, and regulatory scrutiny. Moreover, during the acquisition, the acquiree’s patents, brand, technologies, and other assets are used by the purchasing company to either integrate within its existing operations or to build a new setup. In a nutshell, the procurements serve as a critical growth mechanism for the purchasing company while transforming the overall industrial landscape.
Examples of Acquiree
Disney and 21st Century Fox: In March 2019, The Walt Disney Company completed its acquisition of 21st Century Fox for $3 billion. In this scenario, 21st Century Fox is the acquiree.
Microsoft and LinkedIn: In 2016, Microsoft acquired LinkedIn for $2 billion, one of the largest transactions in the tech industry. Here, LinkedIn is the acquiree.
Facebook and Instagram: Facebook bought Instagram for about $1 billion in cash and stock in AprilIn this circumstance, Instagram is the acquiree.
FAQ Acquiree
What is an Acquiree?
An acquiree refers to the company that is being targeted for purchase or has been purchased by another company, which is called the acquirer. The acquiree may also be referred to as the target company.
What happens to an Acquiree after an acquisition?
The exact outcome for an acquiree post-acquisition can vary drastically, based on the terms of the acquisition agreement. In some cases, the acquiree maintains its operations and brand while functioning as a subsidiary of the acquirer. In other situations, the acquiree could be completely dissolved, its assets merged with those of the acquirer’s.
How does an acquisition impact the Acquiree’s staff?
The impact on the acquiree’s staff in an acquisition can greatly vary. In some instances, staff may experience little change if the acquiree continues to operate as a distinct entity. However, consolidations often result in changes to management and a potential reduction in staff to eliminate redundancies.
What are the benefits to the Acquiree in an acquisition?
The benefits to the acquiree in an acquisition can include financial rescue if the company was struggling, access to new markets or resources through the acquirer, and potential stock profits for owners and shareholders if the acquisition deal includes a beneficial buyout package.
Related Entrepreneurship Terms
- Acquirer
- Mergers & Acquisitions (M&A)
- Takeover
- Buyout
- Valuation
