In the context of finance, the term acquisition usually refers to the takeover by one company of another. Acquisitions can be motivated by the desire to bring some unique capability held by the purchased company under the control of the purchasing company. For example, the acquired company may have developed unique software. Alternatively, acquisitions can be motivated by the belief that cost savings can be made in the acquired company’s running costs by utilising the already existing capabilities of the company doing the acquiring. For example, the purchasing company may have a strong marketing capability and may feel it will be possible to dispense with the marketing arm of the newly acquired company, thus realizing significant cost savings and raising the overall profit levels.

In most acquisitions, the purchasing company is significantly larger than the company being purchased. When the companies are of around the same size, the acquisition is sometimes portrayed as a merger. Mergers are similar to acquisitions but are usually undertaken on a mutually agreed basis. Often there will be an accord about what will happen after the merger is cemented, which management staff will be retained, and how the divisions of the new company will be reshaped.