Growth Of A Company Is Possible By Making Aquisitions
One of the ways for a company to grow is to follow the route of making acquisitions of other firms. These takeovers can be both “friendly” or “hostile”.
Each company has a typical product or service to offer to the customer. After being in business for a long time, every company tries to diversify into other fields, so that it can increase the range of products available to customers. In order to do this, companies try to acquire smaller companies that already have the products and have a good standing in the market. It helps the acquiring company to build on the production lines that are already available rather than to build their own.
Using mutual consent
Many companies require capital funds during their lifetime. To raise these funds, they can either offer shares and equities of the company to investors in the market, or they can ask a company with better financial stability to buy out the company. The acquiring company then takes over the operations and becomes the overall owner of its own and the new business. These acquisitions are called “friendly” as the agreement to merge both companies is mutual.
Use of force
Sometimes companies in all the cities like Delhi, Mumbai, Hyderabad, Chennai, Noida, Pune, Bangalore and Gurgaon fall into financial crises and become open to attacks from other companies that want to take them over. Normally this happens between rival companies where one company wants to corner all profits its rival has been making. It can happen in other cases also. The acquiring company buys all the shares of the targeted company from the market. When it holds more share in its hands, the acquiring company gains control of the targeted company. The forceful acquisitions, in this case, are called “hostile” as the company is acquired against its wishes.
Getting complete control
During both the cases, the acquiring company can offer an extra money called premium on the market price of the share of the acquired company. The premium entices the general public holding the shares of the acquired company to sell them to the acquiring company. It ensures that the acquiring company holds the maximum number of shares and the control. Reputed companies that have a large number of shares already in the market are more susceptible to forceful takeovers.
Growth of company
“Friendly” takeovers can benefit both the acquiring and the acquired companies. The acquiring company grows its business by inducting new lines of production while the production line of the acquired company does not close down. The employees of the acquiring company can learn new techniques for working on the newly added production line while the jobs of the employees of the acquired company are ensured.