Benefit Of Business Acquisition

by ccstbp

Business acquisition is a common and a popular form of corporate development. Every year hundreds of billions of dollars of transaction takes place .Business acquisition is also the most important form of Foreign Direct Investment (FDI) with about 75% of the FDI being in the form of acquisitions (UNCTAD, 2000).

Business can only grow in one of two ways expand from within, or grow through an external acquisition. A successful acquisition involves realizing the potential that a business can deliver, understanding the entitys current and long-term value, and accurately projecting any difficulties inherent with acquiring a new company. There is a fine line between over-reaching for a risky proposition and missing out on a great opportunity. Either possibility results in making a poor choice. Business acquisition must be carefully evaluated and completely considered before proceeding, especially when that acquisition is completed internationally.

During business acquisition business consultant considers the total value concept. In the total value concept, the value of a company not only includes the cash-flow generating active assets, i.e., the economic capital, but also the strategic capital, including the intellectual and human capital that includes the plans and the know-how of turning the plans into economically viable operations.

This means that when a company is a target for business acquisition, its stand-alone value should include the strategic capital that the company has as a separate entity, including the real options that exist for the target company without the acquiring company.

It seems that when done under the right circumstances and executed well, business acquisition can be highly profitable and win-win for shareholders of both the acquiring and the target companies. However, in some cases, the results of acquisitions turn out to be negative for one or both the parties. For reaching a win-win result from corporate acquisitions, valuation issues play a major role. Corporate should consult right business consultant during business acquisition process. You can visit www.qcepconsulting.com