Difference between Takeover and Acquisition

In business terms, there is no difference between a takeover and acquisition, but strictly speaking, the former occurs in a hostile scenario, when a company or corporation decides to acquire another company, and the latter, is a more amicable way of doing the same.

As any purchase requires consent of the board of directors and shareholders, a takeover bid can be rejected from the outset. However, due to financial complications, the bidding party may be in the ascendency and will be in a position to acquire the business on its own terms. That will eventually lead to the downsizing or firing of some of the members of the board, along with the top level management.

However, in an acquisition, the takeover notion is simplified and mutually agreed upon by both the parties. This could lead to the retention of the board of members and other higher management staff, all of whom welcome the takeover bid.

Takeovers and acquisitions require the acquiring company to purchase all business assets and liabilities. The purchase could be subject to greater scrutiny, depending on the financial condition of the company. If a company is in financial distress, the acquiring party gets greater leverage when negotiating the overall price. This could possibly lead to greater hostility and aggression. However, if the targeted company is sound financially, a deal may be struck on friendly terms, which further benefits everyone involved and will lead to market dominance, expansion and cost reduction.

In some scenarios, takeovers can be reversed, which implies that a private company acquires a public company, whose shares are listed on the stock exchange. This is done in order to bypass the process of IPO. A ‘Backflip’ takeover occurs when a small company is acquired by a larger corporation.

Instructions

  • 1

    Takeover

    It is the acquisition of a targeted company by a bidding company. Typically, the term is associated to hostile bidding, where the targeted company is resisting the offer of being acquired by another.

    Image courtesy: laserbrainstudios.com

  • 2

    Acquisition

    Acquisition is a type of corporate takeover, where a company decides to buy most of the targeted company’s assets in order to assume full ownership and control. Acquisition is usually a voluntary or mutually agreed upon corporate arrangement where board of directors of the target company decides to accept the offer of a takeover rather than rejecting it.

    Image courtesy: p3pm.co.uk

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