Acquiring a company’s key assets is an asset acquisition strategy, different from acquiring the entire business by buying shares. It is common in bankruptcies and can be used to gradually gain control of a target company. It can be productive when takeover bids are rejected.
Business acquisitions are strategies that take partial or complete control of a company by incrementally purchasing the target company’s key assets. This approach is different from trying to acquire a business by buying the company’s issued shares, ultimately obtaining a controlling interest in the company. With an asset acquisition, the idea is to gain control of the assets that can be used in the business operations of the acquiring company or to sell those acquired assets at a profit to other buyers.
The use of an asset acquisition strategy is common when buyers want to acquire control of the assets owned by a bankrupt company, but are not interested in acquiring the entire business due to that company’s financial state. Rather than having to acquire the entire business operation, investors can simply choose which assets are attractive, take steps to buy those particular assets, and not have to deal with other holdings that may have no particular interest. Depending on the situation surrounding the bankrupt company, using this approach rather than buying the company and its assets outright might cost less upfront while still providing large benefits on the back end.
Less frequently, an asset acquisition approach can be used to gradually gain control of a target company. Here, the process normally involves gaining control of key resources that are important to the ongoing operation of the company. The process will often require identifying the assets the investor or buyer wishes to acquire, then prioritizing them based on factors such as ease of acquisition or the importance of each asset to the target. As the target becomes more dependent on the new owner of those assets, the opportunity to acquire the remainder of the operation, whether by acquiring a controlling interest through stock purchases or by buying the company outright, can often be accomplished with relatively little effort.
The use of an asset takeover can often be productive when takeover bids are rejected by the target company. This approach is also a viable alternative when the chances of being able to buy enough shares and garner enough shareholder support to mount a hostile takeover are somewhere between slim and none. While the exact process for managing a business acquisition may require slowly gaining control of key businesses and undermining the target until selling is the only real option, a carefully crafted business acquisition can involve generating a significant amount of profit over time.
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