Investing term

What is Acquisition?

One company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.

An acquisition is when one company buys another, with the target's shareholders cashed out or converted into the buyer's stock at the agreed price. Acquirers usually pay a premium over the pre-announcement price to win shareholder approval, which is why a target's stock often jumps the day a deal is announced.

For example

A target trading at $40 gets a $52-per-share cash offer — its stock leaps toward $52 immediately, reflecting the 30% takeover premium.

Acquisition is taught hands-on in Stage 8 — Corporate Actions: What Lands in Your Account.

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Related terms

Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.Deal spreadThe gap between the announced deal price and the live market price of the target's stock.
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