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What is an acquisition strategy and explain its types and elements?
Acquisition strategy is the approach of acquiring products, services, and business by considering factors like brand, financial impact, culture, product etc. It plays a significant role in business expansion and plays part in growth of business.
The elements of an acquisition strategy are as follows −
- Business strategy − Talks about contracting approach (type of contracts, leasing arrangements etc.)
- Contracting strategy − Provides analysis and rationale.
- Major contracts − Identification of contracts and its types.
- Incentivise − Tells about incentives in detail.
- Technical data management − Long term technical data needs are assessed.
- Sustainment − Tells about acquiring integrated product support.
The strategies of an acquisition strategy are as follows −
Adjacent industry − If a company sees an advantage/opportunity in an adjacent industry, it buys an adjacent industry by using its competitive strengths.
Diversification − To offset the risk in its own sector/business, a company may choose to diversify from its core area.
Full service − If a company wants to complete the service providers, then he will acquire the required product line companies to complete the cycle.
Geographical growth − If a company wants to expand in new areas, it will acquire the supported business that has geographical access.
Industry roll-up − To gain the market share, companies acquire small businesses.
Low cost − In this, acquirers will look for businesses which have an appreciable market share and products.
Market window − Company will look for the opportunities for its new product or service.
Product supplementation − One company will supplement another company, who are in similar products.
Sales growth − Company accelerates their growth rate through acquisitions.
Synergy − One acquires another company in a similar market but, an acquirer has more knowledge on doing the business.
Vertical integration − One company acquires another company (either raw material supplier or distributor of its products or may be both) to control products supply chain.
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