Legal Definitions - share acquisition

Share acquisition refers to the process where one company purchases another company by buying a majority, or even all, of its outstanding ownership shares directly from the existing shareholders. This method gives the acquiring company control over the target company, effectively making it the new owner. It is often referred to as a takeover through stock purchase, distinguishing it from acquiring a company by purchasing a company's individual assets.

• Example 1: A Large Tech Company Buys an Innovative Startup

  Imagine a well-established global technology company that wants to expand into the rapidly growing market for artificial intelligence software. Instead of developing its own AI division from scratch, it identifies a smaller, highly innovative AI startup with cutting-edge technology and a strong customer base. The global tech company then offers to purchase all the outstanding shares of the startup directly from its founders and early investors (who are the current shareholders) at a premium price. Once the deal closes, the global tech company owns the startup, its technology, and its operations.

  This illustrates a share acquisition because the larger company gains control and ownership of the startup by buying its shares from the existing shareholders, rather than just buying its patents or equipment.

• Example 2: A Private Equity Firm Acquires a Family-Owned Business

  Consider a private equity firm that specializes in investing in and growing mature manufacturing businesses. They identify a successful, multi-generational family-owned textile company whose current owners (the family members) are looking to retire and sell the business. The private equity firm negotiates with the family, who collectively own all the shares of the textile company, to purchase 100% of those shares. Upon completion, the private equity firm becomes the new owner, taking over management and strategic direction.

  This is a clear example of a share acquisition because the private equity firm acquires the entire business by purchasing all the ownership shares directly from the family members who were the sole shareholders.

• Example 3: A Pharmaceutical Giant Takes Over a Competitor

  A major pharmaceutical corporation is looking to strengthen its position in the oncology drug market and eliminate a significant competitor. It launches a public tender offer, proposing to buy all the outstanding shares of the competitor pharmaceutical company from its thousands of individual and institutional shareholders at a price higher than the current market value. If enough shareholders accept the offer, the pharmaceutical giant will acquire a controlling stake, or even all, of the competitor's shares, thereby taking ownership of the company, its drug pipeline, and its research facilities.

  This demonstrates a share acquisition as the larger pharmaceutical company gains control over its rival by purchasing its shares directly from the public shareholders, effectively absorbing the competitor into its own operations.