Entrepreneurs and investors who want to buy another company have several options. The simplest option is to acquire a company’s assets and liabilities. The value of the business is the difference between its assets and liabilities. However, it’s also possible for the investor to merge their company with the target company to create a larger company with more assets and clients. While most business acquisition transactions are straightforward, others take a different approach. Keep reading to learn how creative acquisition strategies differ from traditional purchases.
Types of Creative Acquisition Strategies
The option to acquire is one of the most popular creative acquisition strategies. After identifying a suitable target company, the investor negotiates the terms of the acquisition, including the price. However, the transaction is not concluded immediately. Instead, the buyer purchases an option from the seller. This is a separate agreement to buy the business after a given period at an agreed price. The option, just like the traditional financial derivative, comes at a price. The buyer must have the financial resources needed to buy the company as well as the willingness to do so.
Investors can use this strategy to avoid the risk of buying a company that is about to collapse or go through a major event, such as liquidation.
Other creative acquisition strategies include; partial book acquisition, strategic alliance, sell and stay, and G2 ownership among others. These creative business acquisition strategies differ from traditional purchases in the following ways:
- They are Complex
Creative acquisition strategies are usually more complex than traditional purchases. Traditional purchases only require the buyer to pay the agreed purchase price to take full ownership of the target company. However, with creative acquisition strategies like the option to acquire, the buyer must first pay a premium for the option and sign a purchase agreement to be activated in the future. As you can see, the creativity in these creative acquisition strategies makes them complex. That is why investors are advised to consult experts in the industry to make the entire process easier.
- They Take Time
Unlike traditional purchases, which can be concluded in a couple of days, creative strategies usually take a lot of time. For instance, an option to acquire can be activated after several months. It all depends on the buyer’s preference. During this period, the offer price cannot be changed and the buyer can either decide to buy the business or abandon the deal altogether depending on whether the set conditions have been met or not.
- They are Less Risky
Buying a business outright through a traditional purchase is risky because you may buy a company that is about to collapse. With creative acquisition strategies, the transaction takes time, so the buyer will have a chance to confirm that the business is sustainable and has a promising financial outlook. This means that creative acquisition strategies are less risky because decisions are not rushed.
- They Require the Involvement of Experts
As noted earlier, creative acquisition tactics are complex, so they require the involvement of experts. Consulting an experienced M&A advisor is crucial if you want the deal to go through successfully. Be sure to do some research on the experiences of the top-rated firms before making a decision.
MergersCorp M&A International
MergersCorp M&A International is an experienced M&A corporate advisory firm with a global reach. The company has concluded dozens of mergers and acquisitions in over 40 countries around the world. The company has experts in a variety of industries to advise clients when they want to buy or sell a company.
- Finnish Strategic Investors Acquire Minority Stake in Italian Football Club “Crema Calcio 1908” - January 10, 2025
- The Rising Trend of Foreign Investment in EU Football Clubs - January 8, 2025
- M&A Trends for 2025: Navigating the Future of Corporate Consolidation - January 1, 2025
