Difference Between Takeover and Acquisition

One of the most effective ways for a business to grow and expand is through acquiring or taking over another company.

An acquisition involves a larger company purchasing a smaller business or corporation. This approach allows the acquiring company to quickly gain new capabilities, enter new markets, and benefit from the existing customer base of the acquired business. Acquisitions can lead to substantial growth by integrating the strengths of both companies, optimizing operations, and leveraging combined resources for a competitive edge.

Takeovers, are a unique kind of acquisition in which a business gains control of another business without the consent of the acquired company.

What Is a Takeover?

A takeover is a process where one company buys out or acquires another company, typically through the purchase of a significant amount of its shares, often more than 50%. This gives the acquiring company control over the target company's operations and ownership. Takeovers are usually hostile. This means that the target company does not agree to the buyout and may actively resist it.

During a takeover, the acquiring company may offer a predetermined sum of money in cash or shares to the shareholders of the target company.

Takeovers are unfriendly, with the buying company forcing the deal even if the other company resists. This aggressive approach is quite different from acquisitions, where both companies agree and work together to form a bigger company through a well-planned process.

Types Of Takeovers

Friendly Takeover: A friendly takeover occurs when the management and key stakeholders of the target company willingly agree to sell a substantial portion of the company's shares to the acquiring party, and this transaction is met with approval and cooperation from all involved parties.

Hostile Takeover: In a hostile takeover, one company secretly buys shares from smaller investors over time. This lets them eventually own enough of the target company to take control. The target company's bosses and board members don't know this is happening.

Reverse Takeover: A reverse takeover is when a private company wants to become publicly traded without doing an initial public offering (IPO). Instead of going through all the steps and expenses of an IPO, they buy a company that's already listed on the stock market. This lets them start selling shares to the public without the hassle of a traditional IPO.

Bailout Takeover: A bailout takeover happens when a struggling business gets saved by financial institutions through rehabilitation programs. To take over the struggling company, the buyer needs to propose their plan to the financial institution first.

Backflip Takeover: In a backflip takeover, the acquiring company becomes a part of the smaller, well-known target company instead of the other way around. This allows the larger company to keep using the smaller company's brand name and benefit from its reputation in the market.

What Is an Acquisition?

A takeover and an acquisition follow very similar procedures. During the acquisition process, one business will buy or acquire the other. Nonetheless, it is important to highlight that acquisitions are typically undertaken in a planned, orderly manner when both sides are very certain that the acquisition would benefit both businesses.

Additionally, in the event of an acquisition, the acquiring business will be entitled to all the target company's properties, equipment, patents, workplaces, trademarks, assets, liabilities, and other possessions. In addition, the acquiring company will either pay the firm in cash or grant compensation in the form of shares in the acquiring company.

After the acquisition process is over, the target company will typically no longer exist because the acquirer will have taken it over. As a result, the purchased business will function as an integral element of the bigger purchasing business. On the other hand, the target business might occasionally function independently under the bigger organization.

Types of Acquisition

Vertical: A company buys another company that is either a supplier or a distributor in its supply chain.

Horizontal: A company buys a competitor or another company in the same industry and at the same stage in the supply chain.

Conglomerate: A company buys a business in a completely different industry or sector.

Congeneric: A company buys another business in a related industry with different products or services.

Difference Between Takeover and Acquisition

Conclusion

Acquisitions and takeovers are a lot alike because they both involve one company buying another, making them work together as a bigger company. The main difference is how they happen: acquisitions are usually carefully planned with both sides agreeing, while takeovers can be aggressive and don't need agreement from the other company.