Definition
Acquisitions refer to the process where one company purchases or takes over another company, becoming the new owner. Examples of acquisitions in finance could be Facebook’s purchase of Instagram in 2012, Disney’s acquisition of 21st Century Fox in 2019 or Microsoft buying LinkedIn in 2016. Acquisitions are typically executed to expand the company’s market, increase shareholder value, or gain competitive advantages.
Key Takeaways
- Acquisitions refer to corporate actions where one company takes control of another. This is often done by acquiring a majority of the target company’s shares or assets.
- Examples of acquisitions can include a larger corporation purchasing a smaller start-up, or a company buying out its competitor. Notable acquisitions include Facebook’s acquisition of Instagram and Google’s acquisition of Youtube.
- Acquisitions are typically strategic moves intended to expand a company’s reach, increase market share, eliminate competition, or gain access to new markets or technologies.
Importance
Acquisition examples are extremely important in finance because they provide a concrete understanding of how theoretical strategies are applied in real-world scenarios. By studying examples of acquisitions, individuals can learn about the diverse strategies companies use to grow or enhance their market capabilities.
These instances illustrate the complexities involved in executing such transactions as well as the potential benefits and risks of pursuing consolidation. In addition, they shed light on the financial elements like valuation, deal structuring, financing, and regulatory approvals.
Learning from thorough analysis of past acquisitions helps predict outcomes, mitigate risks, and increases the chances of success in future deals. It’s through real-life acquisition examples that abstract financial terms and concepts gain practical significance.
Explanation
Acquisitions serve a strategic purpose in the business and financial world, particularly for organizations looking to expand their reach or capabilities. An acquisition is where a company purchases most, if not all, of another firm’s ownership stakes in order to assume control of it.
From a financial perspective, this method is used to increase market share, eliminate competition, gain new technologies or resources, access new markets, or benefit from operational synergies, all aimed to enhance business growth or profitability. Acquisition examples are numerous and spread across sectors.
For instance, when tech giant Facebook acquired Instagram, it was able to leverage the photo-sharing app’s popularity to improve its own offerings and expand its user base. Similarly, Walt Disney’s acquisition of Pixar allowed Disney to revitalise its animation division with fresh creativity and technology.
In the world of finance and technology, Visa’s acquisition of Plaid, a fintech company, reflects the move towards integrating financial services with advanced technology for streamlined financial operations. Each of these acquisitions serve the purpose of making the acquiring company more competitive and profitable.
Examples of Acquisitions Examples
Disney and Pixar: In 2006, The Walt Disney Company acquired Pixar Animation Studios for approximately $
4 billion. This acquisition allowed Disney to strengthen its portfolio with Pixar’s strong lineup of films and characters, and it also enabled collaboration between the talented filmmaking teams of both studios.
Google and YouTube: In 2006, Google acquired the video-sharing platform YouTube for $
65 billion in stock. With this acquisition, Google hoped to grow its search advertising and complement its existing video technology.
Facebook and Instagram: One of the most notable acquisitions in the social media world took place in 2012 when Facebook acquired Instagram for $1 billion. Facebook improved and expanded its mobile strategy with this acquisition, while Instagram benefited from the tech giant’s scalable infrastructure and extensive resources.
FAQs for Acquisitions Examples
What is an Acquisition?
An acquisition refers to the purchase of one company (the acquiree) by another (the acquirer). The acquirer securely gains control over the target company’s operations, equity, and assets.
Can you provide an example of an Acquisition?
One prime example of an acquisition is the purchase of Pixar by The Walt Disney Company in 2006. Disney bought Pixar for approximately $7.4 billion in an all-stock deal.
What is the difference between Acquisition and Mergers?
In a merger, two companies combine to form a new entity, whereas in an acquisition, one company effectively buys another and legally absorbs it, with no new entity being formed.
What benefits can come from an Acquisition?
Acquisitions can offer many benefits including increased market share, diversification, cost efficiencies, and new synergy in management and corporate culture.
What can be potential risks of a Acquisition?
Potential risks can include overvaluation, assimilation issues, loss of key talent, culture clash, and dealing with acquired debt.
Related Entrepreneurship Terms
- Hostile Acquisition
- Friendly Acquisition
- Buyout
- Merger
- Takeover
Sources for More Information
- Investopedia: It’s a comprehensive online resource dedicated to providing concise, reliable financial information, news and advice.
- Forbes: This site offers the latest news about business, investing, technology, entrepreneurship, leadership, and affluent lifestyles.
- Business Standard: Here, you can get all the latest news on Business, Stock Market, Sensex – BSE India, Nifty- NSE India, Economy and Finance news
- Financial Times: This source brings you the current international business, finance, economic and political news, commenting and analysis.
