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Acquisition definition
An acquisition is a transaction where one company buys another company, a business unit, or a controlling ownership stake. It can reset the target's value, earnings outlook, market position, and the way investors price both companies.
An acquisition can be paid in cash, shares, debt, or a mix of these. When the buyer pays in shares, the target's shareholders receive stock in the acquiring company instead of cash.
An acquisition differs from a merger: in an acquisition one company absorbs another and stays the surviving entity, while a merger combines two companies into one new structure. The target's stock often rises toward the offer price, while the buyer's stock can rise or fall on the deal price, funding method, expected synergies, and integration risk.
Acquisition Example
Company A announces it will acquire Company B for USD 50 per share, while Company B was trading at USD 40 before the announcement.
Company B's stock may rise toward USD 50, because investors expect shareholders to receive the higher acquisition price once the deal completes.
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