Acquiree

What Is an Acquiree?

An acquiree is a company that is purchased in a merger or acquisition. In a takeover scenario, the acquiree is otherwise called a "target firm."

Grasping an Acquiree

Companies buy different companies for a number of reasons. The reasoning could be achieving greater economies of scale, diversification, international expansion, supporting market share, expanding synergies or lessening costs. Different inspirations incorporate gaining new technology and diminishing excess capacity and competition in the marketplace.

Generally, a future acquirer needs to purchase a majority of the voting shares of the acquiree, so it can gain operational control. After an acquisition, the buyer might opt to let the acquiree proceed with its operations unobstructed, or do whatever it may take to extract value from the business by cutting expenses or actively expanding its operations.

Paying a Little Bit Extra

Assuming control over a company quite often requires offering a price in excess of the target's fair market value. Acquirees will rarely effortlessly let go of what they've assembled. Acquirers that see strategic value from combining its business with that of the acquiree will need to abstain from scuppering a deal and severing ties. For the most part, they will think about future potential while proposing an offer, paying somewhat extra to guarantee the acquisition wins shareholder support and crosses the end goal.

Significant

Generally, the acquiree will see a short-term movement in the price of its shares to mirror the price per share offered by the acquirer.

The price per share agreed as part of a deal ought to quickly be reflected in the share price of the acquiree. As most targets are acquired at a premium, that means valuations typically flood once news flows that a bid has been postponed. For instance, assuming Company ABC is trading at $12 per share and has 100,000 shares outstanding when it's acquired for $2 million by Company XYZ, ABC's share price ought to then leap to around $20 per share ($2,000,000 \u00f7 100,000 = $20).

The biggest acquisition on record is the $190 billion takeover of Mannesmann by Vodafone AirTouch.

Special Considerations

After a merger or acquisition, it isn't uncommon for the acquiree to hold its operating name. A model incorporates online shoe retailer Zappos, which keeps on trading under that name notwithstanding being acquired by Amazon (AMZN) in July 2009.

It's occasionally workable for an acquirer to adopt the acquiree's name. In 1998, NationsBank of Charlotte, North Carolina, acquired BankAmerica Corporation of San Francisco. Shortly later, the recently made and rebranded business started operating under the name Bank of America (BAC).

On different events, an acquiree's name is collapsed into the acquirer's name. That is the thing happened when United Airlines Holdings (UAL) acquired a lot of Pan American World Airway's (Pan Am) operational assets during the mid-80s into the mid 90s.

Features

When the deal is completed, the acquiree's operating name and management team could vanish or be retained, contingent upon the desires of the acquirer.
An acquiree, otherwise called a target firm, is a company that is purchased under a corporate acquisition.
Acquirees refuse to compromise and will only from time to time sell except if the bid that is postponed is at a premium to its fair market value.
During a takeover scenario, it's generally expected to see the acquiree's share price rapidly shift to mirror the price per share offered by the acquirer.