Asset acquisitions are strategies that call for gaining partial or complete control of a business by incrementally purchasing the key assets of the target company. This approach is different from attempting to acquire a business by purchasing the shares of stock issued by the company, eventually gaining a controlling interest in the firm. With an asset acquisition, the idea is to gain control of assets that can either be used in the acquiring company’s business operations, or sell those acquired assets at a profit to other buyers.
The use of an asset acquisition strategy is common when buyers wish to gain control of assets owned by a bankrupt company, but are not interested in acquiring the entire business operation due to the financial state of that company. Rather than having to acquire the entire business operation, investors can simply pick and choose which assets are attractive, take steps to purchase those particular assets, and not have to deal with any other holdings that may be of no particular interest. Depending on the situation surrounding the bankrupt company, using this approach rather than buying the business and its assets outright could cost less up front while still providing ample rewards on the back end.
Less frequently, an asset acquisition approach can be used to gradually gain control of a target company. Here, the process normally involves gaining control of key assets that are important to the ongoing operation of the company. The process will often call for identifying the assets that the investor or buyer wishes to acquire, then prioritizing them based on factors like the ease of acquisition or the importance of each asset to the target. As the target becomes more dependent on the new owner of those assets, the opportunity to acquire the rest of the operation, either by gaining a controlling interest through stock purchases or buying the company outright, can often be accomplished with relatively little effort.
Use of an asset acquisition can often be productive when buyout offers are rejected by the target company. This approach is also a viable alternative when the chances of being able to purchase enough shares and gain enough support from shareholders to mount a hostile takeover are somewhere between slim and none. While the exact process for managing the asset acquisition may require slowly gaining control of key assets and weakening the target until selling is the only real option, a carefully crafted acquisition of assets can result in generating a substantial amount of profit over time.