Acquisition of stock is a term that is used when one company or entity purchases the stock issued by a different company. This type of stock acquisition may take place as part of a merger, a leveraged buyout, or some sort of consolidation that is taking place with the willing consent of all parties involved in the transaction. At other times, the acquisition of stock may be part of a hostile takeover attempt that the target company may try to thwart before it is too late.
In many instances, the acquisition of stock is discussed and agreed upon before any purchases actually take place. This is often the case when a merger or business consolidation is occurring. In this scenario, both parties agree to a process that calls for purchasing the shares of stock according to a pre-defined schedule that helps to support the merger effort. Here, the idea is to slowly integrate all the various assets and facets of the two entities in a manner that allows for the continued operations of all facilities owned by the entities, at least until the actual merger is completed.
The same general approach to an acquisition of stock may occur when a leveraged buyout is in progress. Often, this is also a friendly situation in which the current owners are slowly handing over control to the acquiring company. The process for acquiring the stock shares is usually done in a manner that does not disrupt operations and allows the company to continuing functioning at pre-buyout levels. This approach can help prevent suspicion and rumors within the industry that could have a negative impact on the values of those shares.
It is also possible for an acquisition of stock to take place as part of a hostile takeover attempt. Here, the target company is not willingly participating in the corporate raider acquiring controlling interest in the business. In many nations, it is necessary for entities that acquire over a certain percentage of stock in a given company to register with a governmental agency regarding their intentions. This can provide the target company with the opportunity to initiate a plan to counter the takeover attempt and bring the acquisition of stock to a halt.
Methods for defusing a hostile takeover attempt include buying outstanding shares and returning them to the control of the issuing company, thus preventing the raider from acquiring enough shares to gain control. At other times, the target company may choose to partner with a friendly company that moves to buy a controlling interest in the target, bringing the takeover to an end. Once the acquisition of stock is blocked, the raider has little choice but to sell his or her acquired shares and seek opportunities elsewhere.
