How Acquisitions Work: Control, approvals and oversight

Acquisitions, the purchase of most or all of a company’s shares by another firm, are a staple of corporate strategy, used to gain control of a target’s assets, operations and customer base. They can be friendly—with the target’s board agreeing to the terms—or proceed without the target’s approval.

During approval processes, a no‑shop clause is often part of the negotiations. While headlines tend to focus on takeovers of household-name corporations, mergers and acquisitions are more common among small- and medium-sized companies than among the largest players.

Control is typically secured when the acquirer buys more than 50% of the target’s stock and other assets, allowing decisions to be made about the acquired business without approval from the remaining shareholders. Companies pursue acquisitions for a mix of strategic and financial reasons: economies of scale, diversification, greater market share, synergies, cost reductions, new niche offerings or simply to remove a competitor.

In friendly deals, both sides work to identify which assets are being purchased and examine financial statements and valuations to surface any obligations tied to those assets. Transactions proceed only when both parties agree to terms and meet legal requirements.

Acquisitions can also be a practical route into new geographies and markets. Buying an existing business in another country provides personnel, a brand and other intangible assets that give an entrant a base to build on. For companies facing physical or logistical constraints, acquiring a promising young firm may be more sensible than expanding in-house, folding the target’s revenues and capabilities into the acquirer’s operations.

In markets crowded with competitors or excess capacity, companies may turn to acquisitions to consolidate supply, reduce duplication and focus on the most productive providers. Regulators monitor such tie-ups closely. Federal watchdogs scrutinize deals—especially between similar companies—that could harm consumers by raising prices or lowering the quality of goods and services.

Sometimes, the quickest and most cost-efficient way to adopt a new technology is to buy a company that has already implemented it successfully rather than spend time and capital developing it internally. Across all scenarios, acquirers evaluate potential targets carefully and consider the steps needed to complete a deal, from due diligence to satisfying legal stipulations, before deciding whether to proceed.