A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume

control of the target firm. An acquisition occurs when one company takes controlling interest in another firm or its legal subsidiary or selected assets of another firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both

Classification of Acquisitions Merger Target firm becomes part of acquiring firm; stockholder approval needed from both firms Target firm and acquiring firm become new firm; stockholder approval needed from both firms. Target firm continues to exist, as long as there are dissident stockholders holding out. Successful tender offers ultimately become mergers. No shareholder approval is needed. Target firm remains as shell company but its assets are transferred to the acquiring firm. Ultimately, target firm is liquidated. Target firm continues to exist, but as a private business. It is usually accomplished with a tend liquidation

Another firm

Consolidation

A firm can be acquired by

Tender offer

Acquisition of Assets its own managers and outside investors

Buyout

 Increased market power. Learning and Developing new capabilities. Overcoming entry barriers. Cost of new product development. Increase speed to market. Lower risk than developing new products.

 In business, a takeover is the purchase of one company (the target) by another (the acquirer, or bidder). A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.

A reverse takeover or reverse merger (reverse IPO) is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public. The transaction typically requires reorganization of capitalization of the acquiring company.

There is no tangible difference between an acquisition and a takeover; both words can be used interchangeably - the only difference is that each word carries a slightly different connotation.

1. An acquisition is frequently

1.

used to describe more friendly acquisitions, or used in conjunction with the word merger, where both companies are willing to join together.

A takeover is used to reference a hostile takeover where the company being acquired is resisting.

 Friendly takeovers - Before a bidder makes an offer for another company, it usually first informs the company's board of directors. If the board feels that accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. Hostile takeovers - A hostile takeover allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer.

 Reverse takeovers - A reverse takeover is a type of takeover where a private company acquires a public company. This is usually done at the instigation of the larger, private company, the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. Backflip takeovers - A backflip takeover is any sort of takeover in which the acquiring company turns itself into a subsidiary of the purchased company. This type of takeover rarely occurs.

1) Funding - Often a company acquiring another pays a specified amount for it .This money can be raised in a number of ways.
Although the company may have sufficient funds available in its account, remitting payment entirely from the acquiring company's cash on hand is unusual. More often, it will be borrowed from a bank, or raised by an issue of bonds. Acquisitions financed through debt are known as leveraged buyouts, and the debt will often be moved down onto the balance sheet of the acquired company.

The acquired company then has to pay back the debt. This is a technique often used by private equity companies. The debt ratio of financing can go as high as 80% in some cases. In such a case, the acquiring company would only need to raise 20% of the purchase price.

2) Loan note alternatives - Cash offers for public companies

often include a "loan note alternative" that allows shareholders to take a part or all of their consideration in loan notes rather than cash. This is done primarily to make the offer more attractive in terms of taxation. A conversion of shares into cash is counted as a disposal that triggers a payment of capital gains tax, whereas if the shares are converted into other securities, such as loan notes, the tax is rolled over.

3) All share deals - A takeover, particularly a reverse

takeover, may be financed by an all share deal. The bidder does not pay money, but instead issues new shares in itself to the shareholders of the company being acquired. In a reverse takeover the shareholders of the company being acquired end up with a majority of the shares in, and so control of, the company making the bid. The company has managerial rights.

 Increase in sales/revenues (e.g. Procter & Gamble takeover of Gillette) Venture into new businesses and markets Profitability of target company Increase market share Decrease competition (from the perspective of the acquiring company) Reduction of overcapacity in the industry Enlarge brand portfolio (e.g. L'Oral's takeover of Bodyshop) Increase in economies of scale Increased efficiency as a result of corporate synergies or redundancies

Goodwill, often paid in excess for the acquisition. Reduced competition and choice for consumers in oligopoly markets. Likelihood of job cuts. Cultural integration/conflict with new management Hidden liabilities of target entity. The monetary cost to the company. Lack of motivation for employees in the company being bought up.

Kraft Foods takeover

On 7 September 2009 Kraft Foods made a US$16.2 billion indicative takeover bid for Cadbury. The offer was rejected, with Cadbury stating that it undervalued the company. On 19 January 2010, it was announced that Cadbury and Kraft Foods had reached a deal and that Kraft would purchase Cadbury for US$18.9bn. Kraft, which issued a statement stating that the deal will create a "global confectionery leader", had to borrow US$11.5bn in order to finance the takeover.

The Hershey Company, based in Pennsylvania, manufactures and (but not its other confectionery) in the United States.

 The acquisition of Cadbury faced widespread disapproval from the British public, as well as groups and organisations including trade union Unite , who fought against the acquisition of the company which, according to Prime Minister Gordon Brown, was very important to the British economy. Unite estimated that a takeover by Kraft could put 30,000 jobs "at risk On 2 February 2010, Kraft secured over 71% of Cadbury's shares thus finalising the deal. Kraft had needed to reach 75% of the shares in order to be able to delist Cadbury from the stock market and fully integrate it as part of Kraft. This was achieved on 5 February 2010, and the company announced that Cadbury shares would be de-listed on 8 March 2010.

The immediate challenges are : The negotiation process was hostile. They are iconic brands that have long pursued different positioning. Perceived dominance. There is a learning curve. Tough decisions are inevitable.