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What Are Small Business Acquisitions?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 August 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Small business acquisitions are business deals in which small businesses either merge with another company or are purchased outright by a group of investors or another corporation. Acquisitions of this type may take place for a number of reasons, including eliminating competition in the marketplace or as a strategy to gain control of intellectual property or assets owned by the acquired business. Depending on the purpose of the acquisition, the small business may continue to function in much the same manner as before, or cease to operate as a distinct entity within the business community.

One of the more common examples of small business acquisitions is the merger. Small business mergers often occur when the owners of two smaller companies come to realize that by combining their resources, the potential to capture a greater market share is enhanced significantly. When successful, the merger of two or more smaller companies helps to create an organization that can reach more customers, produce greater quantities of goods and services, and in general function with a degree of efficiency that would be difficult for those businesses to achieve on their own.

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Large companies may sometimes engage in small business acquisitions as a means of neutralizing a threat to that company’s position within the marketplace. In this scenario, the smaller business may show promise of becoming a major player within the industry and eventually threatening the prestige and the revenue stream of the larger company. In order to prevent this from happening, the larger business will take steps to acquire the smaller company, including any intellectual property and product development efforts that are underway. This allows the new owner to absorb those assets, effectively eliminate the threat, and possibly even use those assets to strengthen the new owner’s market share.

Small business acquisitions may also come about as part of the strategy of a corporate raider. In this scenario, the idea is to gain control of smaller businesses that have one or more assets that the raider believes can be sold at a profit. Once the business is acquired, it is often dismantled and various assets such as land, equipment, and other holdings sold to the highest bidders. The raider may even be able to sell the shell of the acquired company for a tidy sum, making the venture all the more profitable. Once complete, the raider will look for other small business acquisitions to pursue, repeating the process of buy, dismantle, and sell as the means of generating profits.

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