An acquisition deal is when a company purchases another business in order to expand its own operations. The goal is to increase revenue and reach a bigger market. It can be a complicated process that requires a lot of paperwork, but it is necessary to ensure that everything is done correctly.
The most important thing is to have a clear understanding of the acquisition process and what needs to be completed. A good starting point is to create a rough draft of the acquisition plan and then work through it with the experts on your team. This will allow you to determine all of the rights and obligations of both parties. It will also help you avoid overpaying for a business and make sure that all of the assets are documented properly.
Depending on your business’s goals, you may need to choose between a horizontal or conglomerate acquisition. A horizontal acquisition involves purchasing a firm that is in the same industry sector and at the same level of the supply chain. A conglomerate acquisition, on the other hand, involves a parent buying a firm that is in a different industry sector and at a different level of the supply chain.
After a thorough analysis of the target company, the purchaser will either sign a Stock Purchase Agreement (SPA) or an Assets Purchase Agreement (APA). An SPA transfers ownership through the purchase of shares. This method allows the buyer to take on all of the seller’s existing liabilities, from debt to ongoing contracts. However, it also increases the risk of hidden costs and unexpected expenses. An APA allows the buyer to select specific assets, reducing the risk of inheriting unwanted liabilities.