An acquisition is the process of taking over the ownership of a company or its assets, either in majority or in full, to gain control over its business operations. This practice is common in the business world and is often used by companies or startups to accelerate growth.
Unlike a merger, which unites two companies without changing ownership control, an acquisition transfers ownership from one party to another.
Although sometimes misunderstood as negative for the previous owners, acquisitions can actually bring positive impacts to many parties involved.
To understand acquisitions more clearly in the business world, let’s explore the full explanation below!
Definition of Acquisition
An acquisition is the process of taking over a business through purchasing some or all of its shares or assets.
Etymologically, acquisition means “obtaining,” while in management, it refers to the transfer of authority when one party gains control over at least 50% of shares. Simply put, an acquisition is the transfer of ownership and business control through the transfer of shares or assets.
In practice, acquisitions are commonly done by large companies toward small and medium-sized businesses, but they can also occur between two large companies. The process may occur with or without prior agreement depending on negotiations.
Through an acquisition, the acquiring party (acquirer) gains control over the acquired company. Meanwhile, the acquirer may use a proxy vote approach—persuading shareholders to replace board members with those who support the acquisition plan.
Differences Between Merger and Acquisition
Mergers and acquisitions are often seen as similar, but they have several key differences.
In a merger, two companies agree to combine into one new entity with shared ownership.
In contrast, an acquisition occurs when one company buys most or all of another company's shares so that control shifts to a single party. In terms of valuation, the acquisition value is generally higher because the price is determined directly by the business owner or shareholders of the acquired company, although this depends on valuation and negotiations.
Acquisitions are also considered more sensitive than mergers because the process can attract public attention and potentially offend previous owners—especially if not all parties agree to the transaction.
Objectives of Acquisition
Understanding the objectives of an acquisition helps businesses create a clear and strategic roadmap. The objectives include:
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Expanding the market: An acquisition is an effective method to expand reach because companies can add capital and broaden their market more quickly.
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Boosting business growth: The new owner gains full control of all resources, from machinery to human capital. If the acquired company has strong fundamentals, business development becomes faster.
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Reducing competition: Many large companies acquire smaller competitors early to prevent them from becoming stronger rivals.
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Improving operational efficiency: Acquisitions can simplify business processes—for example, when a parent company takes over branches to optimize existing resources.
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Accelerating technology adoption: This strategy allows faster technology transfer because the new owner can streamline processes and reduce inter-company bureaucracy.
Advantages of Acquisition
Acquisition strategies offer many advantages that make companies more competitive and efficient, such as:
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Increased business capitalization: Acquisitions add new assets, increasing the total capitalization—sometimes significantly.
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Broader market share: By acquiring competitors, a company gains their market share and strengthens its position.
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More practical than mergers: Acquisitions are relatively simpler because there is no need to form a new entity; the company can directly adjust existing legal and operational aspects.
Disadvantages of Acquisition
Despite its advantages, acquisitions also have risks, including:
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High capital and administrative costs: Acquisitions require significant budget, including administrative transfer fees. Therefore, acquisitions are commonly done toward small or distressed businesses to control cost.
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Difficulty managing large resources: If the acquiring company is unprepared, managing a bigger organizational structure can be ineffective and reduce projected benefits.
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Slower cultural integration: The integration process between the existing culture and the new culture can take time, and employees may feel the acquisition is a form of “forced cultural change,” creating challenges for HR.
Types of Acquisition
Each acquisition type has distinct characteristics depending on business strategies. The most common types include:
1. Vertical Acquisition
A vertical acquisition occurs between two companies within the same supply chain—from upstream to downstream. It aims to ensure smooth supply and product distribution.
2. Horizontal Acquisition
A horizontal acquisition takes place between companies operating in the same industry—usually competitors. It is carried out to expand market share and reduce competition.
3. Conglomerate Acquisition
A conglomerate acquisition involves companies with no horizontal or vertical relationship. Its purpose is to strengthen the acquiring company overall while enhancing the company portfolio.
Examples of Acquisition
Despite the challenges, acquisitions are widely carried out both locally and internationally. Some notable examples include:
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Google acquired Android in 2005.
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Facebook acquired Giphy in 2020.
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Apple acquired Siri in 2010.
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Bank Central Asia (BCA) acquired Rabobank Indonesia in 2019.
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Tokopedia acquired the wedding vendor marketplace Bridestory in 2019.
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Carro acquired Indonesian secondhand goods marketplace Jualo in 2019.
Understanding acquisitions is important for business owners—especially when planning business expansion, strengthening a company’s foundation, or seizing strategic market opportunities. This process requires thorough planning, precise analysis, and solid financial support to ensure safe and effective execution.
However, acquisitions are not the only path to business growth. Business expansion can still be achieved through self-financing or funding support. If you need additional capital for business development, BFI Finance offers flexible and trusted financing solutions.
You can choose financing services with Motor BPKB, Car BPKB, or House/Shop/Commercial Property Certificates based on your business needs. All financing products from BFI Finance are licensed and supervised by the Financial Services Authority (OJK), ensuring a safe and transparent process.
So, what are you waiting for? Take action now and execute your business strategy confidently because #SelaluAdaJalan with BFI Finance!
