The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results.

When one company decides to take over another one, it is referred to as an acquisition. The acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over.

Acquisition definition

When one company decides to take over another one, it is referred to as an acquisition. The acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over.

There are two types of acquisition: hostile and friendly. A hostile takeover is the term for when a company is bought by another without its consent, usually when the buying company purchases a majority amount of its shares to get a controlling stake. When both companies agree to the terms of the acquisition, it is referred to as a friendly takeover.

Acquisitions are usually made as part of a company’s growth strategy, with the targeted company having something that the buying company wants but either cannot or does not wish to develop internally. They are mostly made in exchange for cash, stock in the buying company, or a mixture of the two.

Mergers and acquisitions

When both companies see synergy in combining forces but wish to come together as equals, it is referred to as a merger. Traders will often refer to both under the same umbrella term: mergers and acquisitions, or M&A for short.

 

Share dealing news

Visit our share dealing news section for the latest news and analysis on world markets, industries, currencies and more.

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - Y

See all glossary trading terms