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Why Do Companies Want to Acquire Other Businesses?

In: Business and Management

Submitted By tiwu
Words 502
Pages 3
Many companies see buying ready made business as a way to minimize risk and reduce their rate of failure. Normally, the typical buyer knows its own market niche quite well, and can safely increase its revenues and market share over time by continual, careful attention to internal organic growth. Here are a few reasons to buy an existing business I can think of:

1.To Avoid the Risk Involved With Building a Business From Scratch.
One of the most difficult things about starting a business is getting all of the systems in place. When you purchase an existing business, all of the systems are already going to be in place. If you are purchasing a successful business, you may not have to change much. You can simply adjust things occasionally in order to improve them. Furthermore, if you purchase an existing business, you will most likely have several employees already in place. This means that you will not have to train everyone you can bring in new people as you need to.

2.To Gain Access to New or Emerging Technologies
The target may have an excellent product that the buyer can use to fill a hole in its own product line. I think this is an especially important reason when the market is expanding rapidly, and the buyer does not have sufficient time to develop the product internally before other competing products take over the market. Also, acquired products tend to have fewer bugs than ones just emerging from in-house development, since they have been through more field testing, and possibly through several build cycles. However, considerable additional effort may be needed to integrate the acquired products into the buyer’s product line, so factor this issue into the purchase decision.

3.To Strengthen the Company’s Competitive Advantages
Intellectual property is a defensible knowledge base that gives a company a competitive advantage, and is one of the best...

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