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Defining acquisitions and takeovers

Business owners in Texas may be familiar with the different ways that a company can increase its reach. Understanding the basics of acquisitions and takeovers may be beneficial to entrepreneurs who are looking to expand.

An acquisition occurs when the board of directors of one company steps aside and allows another company full control over their corporation. This usually occurs when one company purchases the other. The acquiring company will most often agree to buy all the acquired company's assets or stock. This allows the acquired company's board of directors to complete the deal without the requirement of full shareholder consensus. The acquiring firm must perform due diligence on their target company in order to have a proper valuation for their purchase.

A takeover is a specialized type of acquisition in which the target firm does not wish to be acquired. This is most often carried out by purchasing a controlling interest in the stock of the company. Since owning a majority of the stock may give an entity the right to make decisions regarding the company's future, the firm carrying out the hostile takeover would have the ability to vote in their own board of directors and then proceed with a straightforward acquisition. The target corporation may choose to defend itself against such takeover attempts by purchasing its own stock back to shore up control of the company or disputing the takeover in court. Anti-trust lawsuits can be cited to prevent the hostile firm from completing the sale in some cases. It is also possible to restructure assets in a way that makes the company less attractive to the acquiring firm.

Business owners and entrepreneurs who wish to acquire a company and form an entity may find the advice of an attorney to be advantageous. An attorney who is familiar with business transactions may be able to help a company expand through acquisitions or takeovers.

Source: The Houston Chronicle , "Takeover Vs. Acquisition", Rose Johnson , November 20, 2014

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