An acquisition occurs when one company purchases enough of another company’s stock to gain control. Owning at least 50% of a firm’s shares effectively grants control over the target firm’s operations.
Acquisitions may be voluntary or involuntary on the targeted firm’s side. Due to their legal and tax implications, an investment bank may assist the process.
Companies may initiate acquisitions to reduce costs or competition, expand into new markets, diversify their holdings or acquire new technologies or revenues. Potential downsides include culture clashes, layoffs, supplier pressures and brand damage.