Tuck-in Acquisition

What Is a Tuck-in Acquisition?

A tuck-in acquisition involves a larger company completely absorbing another, typically more modest, company and integrating it into its own platform. The acquirer's platform comprises of the innovative structure, inventory and distribution systems, and any remaining operational parts of the business. In a tuck-in acquisition, the more modest company doesn't maintain any of its own original systems or structure after the acquisition.

Tuck-in acquisitions are normally executed in order to develop the acquiring company's market share or resource base. A tuck-in acquisition is at times alluded to as a "bolt-on acquisition."

Understanding Tuck-in Acquisitions

A corporate strategy that involves tuck-in acquisitions is generally used to obtain companies with resources that would be significant to the acquiring entity. These resources could be things, for example, complementary product lines, technology, intellectual property, or market share. The ideal target of a tuck-in acquisition is a more modest company with limited growth possibilities and resources that are important to the acquiring firm.

In a tuck-in acquisition, the two substances as a rule exist within a similar industry or consume comparable spaces in the market, yet the acquiring company has more operational resources. This means the acquiring company is as of now set up to run a fruitful business; they have the important distribution, inventory, marketing, technology, and capital in place to be competitive in the industry.

At the point when they can manage the cost of it, a few exceptionally large companies choose for make a number of acquisitions in a short period of time as opposed to spend a long time in its research and development phase.

Apple CEO Tim Cook told investors in a February 2021 shareholders meeting that the company had acquired in excess of 100 businesses in the past six years. This midpoints out to Apple purchasing a company each three to about a month.

Illustration of a Tuck-in Acquisition

For instance, Company XYZ is a large company that makes gadget presses. Company ABC is a more modest company that likewise produces gadget presses. As a matter of fact, Company ABC is so skilled at making gadget presses, they have changed the cycle for making gadget press parts so that makes them more durable at a less expensive cost. Company ABC likewise claims the technology that makes these sweet gadget press parts. In a tuck acquisition, XYZ company goes along and purchases Company ABC and completely integrates Company ABC's technology into its own systems. Company ABC begins running its systems on XYZ company's all's platforms and is completely absorbed into XYZ.

Tuck-in versus Bolt-on Acquisition

Albeit both tuck-in and bolt-on acquisitions allude to the course of a larger company acquiring a more modest company that offers some strategic value, there are differences between the two terms. Though a tuck-in acquisition means a complete absorption of the more modest company — it doesn't maintain any of its own original systems or structure after the acquisition — a bolt-on acquisition might permit the acquired business to operate independently within its own department of the larger company.

In the case of a bolt-on acquisition, acquiring businesses permit the more modest entity to keep its brand name or operate independently in light of the fact that it very well might be profitable to do as such, especially in the event that the more modest entity has fabricated goodwill or name recognition for its brand. One true illustration of a bolt-on acquisition is Amazon's purchase of Whole Foods.

Features

• A bolt-on acquisition is like a tuck-in yet permits the acquired company to maintain a portion of its independence.
• A larger company for the most part utilizes a tuck-in acquisition to incorporate a specific resource by the more modest company, like a technology or intellectual property, or to develop its market share.
• In a tuck-in acquisition, the more modest company doesn't maintain any of its own original systems or structure after the acquisition.
• A tuck-in acquisition happens when a large entity completely retains a more modest one.