Understanding the Basics of Acquisitions

An acquisition is a financial term that describes what happens when an organization develops its competences and resources by taking over a different company. There are many different types of acquisition strategies. More information about the various strategies can be obtained through General Equity – Acquisitions.

Acquisition agreement

Some of the popular strategies include single purpose documents and standalone acquisitions, as well as multi-purpose documents, which are more comprehensive. Regardless of the chosen strategy, the goal of an acquisition strategy is always to minimize the cost and time used to obtain a specific, validated need and this is achieved through sound business practices and common sense.

Acquisition strategies always include a number of critical events, which guide and govern how a program is managed. Additionally, each strategy is unique as it has to match the specific needs of the particular program. This includes fielding strategies and the consideration of incremental development.

An acquisition strategy is essentially in place as a form of checklist, allowing those involved to make sure they have considered all the important issues and their alternatives. This will then aid in the decision making process so that they can integrate and prioritize functional requirements, make sound decisions when having to choose an alternative, delivering a coordinated approach and identifying specific decision points.

What Is an Acquisition Strategy?

Basically, it is:

  • A foundation to help develop the activities and plans within a program.
  • A formal record that lists all the strategic changes that have been applied when factors (threats, technology, environment) come into play.

Significant research has shown that the vast majority of acquisitions fail. Yet, almost every business will be involved in an acquisition at some point. If managed properly, for instance as part of a merger, there is a much bigger chance of it being successful. The most important thing is to get the strategy right and to be innovative in all approaches.

Strategy Making Tasks

The tasks of the strategy makers are simple:

  1. They must develop a strategic vision.
  2. The must set objectives.
  3. The must write down the strategy.

To develop a strategic vision, they must ask themselves what or who they are at present, what or who do they want to be and how to get from the first point to the next point. While this is explained very simplistically, the reality is that this is a complex process. Additionally, developing a strategy takes quite a long time and implementing and realizing a strategy takes even longer. Over that period of time, many things will change. This is why it is so important that everybody involved in developing, implementing and evaluating the strategy is a true innovator who is able to respond to and manage change properly.

Mergers and acquisitions are complex financial processes that have the potential to influence the global economy. As such, they are business decisions that should not be taken lightly. It is equally important, therefore, that some consensus is reached by the people within an organization that will be affected by this.

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