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What Is the Acquisition Process?

A large amount of research is necessary before a company considers purchasing another business.
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  • Written By: Keith Koons
  • Edited By: Lauren Fritsky
  • Last Modified Date: 19 October 2014
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An acquisition process refers to the steps taken when one company purchases or merges with another. There are many different scenarios in which this could occur, and the method would rely solely on the type of ownership that the sellers have. When a publicly-traded company is sold, for example, the buying entity normally offers a premium on all of the available stock options to begin the acquisition process. From that point, there are often negotiations that involve numerous aspects of the purchaser's intentions, ranging from the future goals of the company to what benefits will be offered to the remaining employees. The acquisition process would be considered over once the buyer has taken full possession of the company and made any necessary changes the new management staff sees fit.

Of course, a whole lot can happen once the sale is finalized, and for staff members, this is normally the most stressful part of an acquisition process. Some business groups are notorious for immediately terminating all but a handful of the most important staff members, while other buyers will eliminate entire departments and merge them with existing companies. It is almost impossible to tell a buyer's true motivations before the mergers and acquisitions process is completed, which is why sellers normally try to get written stipulations on the points that they feel strongest about.

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The acquisition process of a privately-held business happens almost exactly the same way, with a few notable exceptions. Instead of a group of shareholders being involved, the buyer can communicate directly with the owners of the business. This drastically accelerates the acquisition process for all parties involved, and in private sales, there is also a good bit more leeway in terms of negotiations. It is not uncommon in this situation for a seller to remain employed by the new company for a period of time to smooth over the transition process. Another large aspect of negotiations is the copyrights held on the products being sold through the company, and sometimes they are treated as completely separate entities.

Before a company would even consider purchasing another business, a huge amount of overall research is involved. The very first steps of an acquisition process involve requesting financial information like profit and loss sheets, tax receipts, inventory levels, and hundreds of other documents that would help determine a true worth of a business. This part of the process alone could take years to complete when evaluating larger corporations, and that is before fully determining if a fair buying price is even possible.

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