An acquisition involving a company buying most, if not all, of another company. Acquisitions are often part of a company’s growth strategy when it is more beneficial to take over an existing firm’s operations and niche compared with expanding on its own. Acquisitions are often paid for in cash, in company stock, or a combination of both.
Acquisitions can be either friendly or hostile. Friendly acquisitions occur when the target firm agrees to be acquired, whereas hostile acquisitions do not have the same agreement from the target firm and the acquiring firm needs to purchase a majority of the shares of the target company to gain control. In either case, the acquiring company often offers a premium on the market price of the target company’s shares to entice shareholders to sell. A new company is not always formed after an acquisition.