Are you wanting to buy a business in a new and unfamiliar country as an investment or to become an owner operator. IBB can help you do this and manage the risk by ensuring your interests are well represented and your investment is guarded.
As independent brokers we make sure your needs are never compromised within the buy-sell transaction as we only represent you the buyer and not the seller and unlike mergers, acquisitions do not result in the formation of a new company. Instead, the purchased company gets fully absorbed by the acquiring company. Sometimes this means the acquired company gets liquidated. Acquiring a business is like buying an existing business or franchise.
There are four main types of acquisitions based on the relationship between the buyer and seller: horizontal, vertical, conglomerate, and congeneric.Regardless of the type, in general, a company will acquire another company because its decision makers believe it will improve the bottom line — whether by increasing sales, decreasing costs, or otherwise. But each of these different types of acquisitions accomplishes that goal in a different way.
Horizontal acquisition:
A horizontal acquisition is when one company acquires another company that is in the same business. For example, ABC Inc., a widget manufacturer, acquires XYZ Corp., another widget manufacturer.
Some horizontal acquisitions involve competitors. For example, in the case of ABC Inc. and XYZ Corp., they both sold to the same customer base.
However, a horizontal acquisition does not have to involve competitors. This would be the case if ABC Inc. sold widgets exclusively in Region A, while XYZ Corp. sold only on in Region B.
The advantages of a horizontal acquisition include the potential to increase a company’s customer base and market share and help a company expand its reach into new markets.
Vertical acquisition:
A vertical acquisition is when one company acquires another company that is in a different position on the supply chain.The acquirer may be higher up on the chain. For example, ABC Inc. (our widget manufacturer) acquires a company that makes a key component part used by ABC Inc. to make its widgets. Or the acquirer may be lower on the chain. For example, ABC Inc. buys the company that has retail stores that sell its widgets.Vertical acquisitions can bring in new income streams as well as lower costs of production and streamline operations.
Conglomerate acquisition:
A conglomerate acquisition is when the acquirer and target are in unrelated industries or engaged in unrelated activities. For example, a company involved in the real estate business acquires an insurance company. (Or either company acquires our widget manufacturer.)
Diversification is a main reason for a conglomerate acquisition. If one product or service is struggling, hopefully there are others that are doing well — helping to provide stability for a company.
Congeneric acquisition:
A congeneric acquisition is when the acquiring company and the acquired company have different products or services but sell to the same customers. For example, DEF LLC provides a trademark searching and filing service for law firms and acquires LMN LLC, which provides a UCC searching and filing service for law firms. This kind of acquisition helps a company increase market share and expand its product lines.