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Differences between Acquisitions and Asset Management
Acquisitions and asset management are two concepts that have been brought to the attention of every successful company at some point in its history. They are also two concepts that the vast majority of people misunderstand. Some people will use one to refer to the other. But is there a distinction to be made between the two? In this post, let's find out exactly what acquisitions and asset management are, as well as the key contrasts between the two.
What is Acquisition?
The process of one firm purchasing the majority of all of the shares of another company in order to assume control of that company is referred to as an acquisition. When a corporation purchases more than fifty percent of another firm's assets or stocks, it gains the ability to make decisions regarding those assets without first obtaining the consent of the company's other shareholders. Acquisitions are carried out with the goals of gaining control of the target firm and capitalizing on its existing capabilities.
Acquisitions may be broken down into two major categories − the acquisition of assets and the acquisition of shares.
When referring to a firm, "asset acquisition" refers to the purchase of certain assets and liabilities, whereas "stock acquisition" refers to the buying of the entire company, which includes all of its assets and obligations.
Requisitions are submitted by businesses in order to −
Enter new markets – It is far simpler for a firm to break into a new market with an existing brand that is well-known and has a solid reputation in addition to an established customer base than it is for the company to do so with a new brand. Through the use of acquisitions, formerly difficult obstacles to entering a market can be eliminated.
Increase Market Power – A company's ability to swiftly grow its market share can be helped through acquisitions. Synergies are defined as any impact that enhances the value of a merged business more than the combined value of the two independent firms. This procedure increases synergies, which are defined as any effect that improves the value of a merged firm.
Acquire new competencies and resources – A corporation can decide to purchase another business in order to gain access to capabilities that it does not now possess. In this manner, it improves its revenue, which in turn has the potential to enhance the company's financial condition over the long run.
Access to many types of professionals – When small firms collaborate with larger corporations, they have the opportunity to network with industry professionals such as finance and legal specialists.
Access to capital – The larger firm has an easier time gaining access to money, which allows them to qualify for greater loans from the banks without having to delve deeper into their own pockets.
Other causes include the introduction of new ideas and points of view from an expert group, the reduction of spare capacity, and the increase in the level of competitiveness, as well as diversification.
What is Asset Management?
The process of developing, operating, and maintaining assets, as well as selling them in a manner that is profitable, is referred to as asset management. In the context of finance, the phrase may also be used to refer to persons or businesses whose primary function is to act as asset managers for the benefit of other people or organizations.
Every business has to maintain accurate records of its assets in order to inform its stakeholders about which of those assets might be utilized to achieve the best possible results. Fixed assets and current assets are the two main categories that may be used to categorize assets. Fixed assets are ones that are bought for usage over a longer period of time. The assets that are considered current are those that may be sold or otherwise transformed into cash in a very short length of time.
Asset management is crucial because −
It gives companies the ability to keep track of all of their assets. The procedure gives the owners of the company the ability to learn where their assets are situated, how they are utilized, and whether or not there have been any modifications made to them. As a result, asset management assists organizations in monitoring all of their assets, regardless of whether they are fixed or liquid.
Contributes to ensuring that the rates of amortization are accurate. The practice of gradually writing down the initial cost of an asset is referred to as the "amortization" process. Asset management ensures the statements are accurate by doing routine checks on the assets to confirm that they are in good shape.
Helps identify and manage hazards. Businesses are able to identify and mitigate the risks that come with the ownership and usage of certain assets through the process of asset management. In this manner, a company ensures that it will always be prepared to manage any risk that may arise.
Removes from the company's record books any assets that have gone missing. It is the responsibility of asset management to guarantee that the company's inventory does not include any assets that have been destroyed, stolen, or otherwise misplaced. This helps to paint a more accurate image of the assets that are actually owned by the firm.
Differences between Acquisition and Asset Management
The following table highlights the major differences between Acquisition and Asset Management −
| Characteristics | Acquisition | Asset Management |
|---|---|---|
| Definition | The process of one firm purchasing the majority of all of the shares of another company in order to assume control of that company is referred to as an acquisition. | The process of developing, operating, and maintaining assets, as well as selling them in a manner that is profitable, is referred to as asset management. |
| Purpose | To gain control of a firm, acquisitions require purchasing either the assets or the stocks of that company. | Acquiring, preserving, and selling assets are all part of the asset management process, which aims for expansion as well as responsibility. |
| Item of purchase | Acquisitions might involve stocks in addition to other types of assets. | The only things that are involved in asset management are assets. |
| Parties involved | In a business transaction known as an acquisition, two firms come together so that one may purchase the other. | Accounting for a certain firm's assets is what's involved in asset management for that company. |
| Decision-making | In the case of an acquisition, if the acquiring business purchases more than 51 percent of the target company's assets or stocks, it is allowed to make decisions without the prior consent of the target company's shareholders. | When it comes to asset management, only the particular firm is involved, and all of the choices are made within this company. |
| Tracking Tool | During the acquisition process, tracking is not required. | Asset management requires the use of asset management software in order to accurately record and monitor all of the assets. |
Conclusion
Even while acquisitions and asset management are phrases that are frequently employed in the context of the business world, the two concepts are distinct in and of themselves.
During an acquisition, one corporation will buy the assets or stocks of another company in order to eventually assume control of the acquired company. The process of acquiring, preserving, and exchanging an individual company's assets for the sake of growth and responsibility is referred to as asset management.
The more you know, the more power you have. Because you now understand what they are, you will be able to discern between them and apply them in the right context during the next business meeting you attend.
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