Acquisition in the Context of Economics

Acquisition in economics refers to the process by which one company takes over another company, either through the purchase of its shares or assets. It is a corporate strategy and financial operation used to expand a company’s operations, enter new markets, or acquire new technologies or resources. The company making the acquisition is known as the acquirer, while the company being acquired is referred to as the target.

The acquisition can be thought of as a big fish eating a smaller fish to get bigger. A company buys another company to grow larger, get access to new customers, or add new products to its lineup. It is a quick way for companies to grow instead of building new business segments from scratch.

In Economics, Acquisitions are a key aspect of corporate economics, mergers and acquisitions (M&A), and strategic management. They play a crucial role in shaping industries by allowing companies to quickly adapt to market changes, expand their footprint, or consolidate their position in the industry. Analysts and economists study acquisitions to understand their impact on competition, innovation, and market dynamics.

For example, a technology company might acquire a startup that has developed innovative software to enhance its product offerings and eliminate a potential competitor. Similarly, a multinational corporation may acquire a local company in a foreign market to quickly establish a presence there instead of building a new operation from the ground up.

Source: A to Z of Economics by Dr. NC Raghavi Chakravarthy