Acquiring another company is a common move for larger businesses that want to expand their own operations, reduce the likelihood of competition and adopt new skills or resources that they otherwise would not possess.

However, acquisition also has its downsides, especially when it comes to costs and the price of combing two similar companies.

Acquisition is typically associated with leveraged buyouts and forced sales instead of more benign mergers, which may also create goodwill issues for a company. A primary benefit to acquiring an organization is the increased revenue a business can enjoy.

This tends to occur when a company acquires a subsidiary that operates in a different market or creates a markedly different product or service. The acquired organization can maintain operations and direct its earnings toward its new parent company, allowing for greater earnings reports overall. Revenue may also be gained by the sale of assets of the acquired company.

When a company acquires another organization, it also acquires when successful the efficiencies and experience of that company, which allow the business to benefit from core competencies it did not have before. Also, competition in the market is reduced overall, and the company typically receives the portion of the market that the acquired business had. This benefit is primarily spdr gold trust call options when a business acquires a competitor, not a completely different organization.

The costs of acquiring another organization can be high, especially when it comes to tough acquisitions in which the company must make deals with members of the board of fx gbp zar and accurately gauge a tangle of product diversification strategy pros and cons reactions. Stock and company value may be worth a certain amount at acquisition but fall afterward because of the acquisition itself.

Other costs may be pushed higher to retain talented employees who would otherwise leave. Costs for business debts and supplier orders may be included. In all, expenditures for the acquisition can be very high and may lead to a loss.

Business diversification strategy | Advantage | disadvantage

Hostile takeovers can reduce overall company goodwill and may result in the loss of customers that both companies previously had. Redundancies can lead to firing many oil futures trader drunk in order to compare dstv options on costs, resulting in the loss of talent and the disruption of company cultures and partnerships that would otherwise have benefited the organization.

Economic and community issues may also result in areas where layoffs are high. He works on business and technology topics for clients such as Obsessable, EBSCO, Drop. Skip to main content. Increased Revenues A primary benefit to acquiring an organization is the increased revenue a business can enjoy.

Strategic business diversification

Increased Skills and Market Impact When a company acquires another organization, it also acquires when successful the efficiencies and experience of that company, which allow the business to benefit from core competencies it did not have before. Costs The costs of acquiring another organization can be high, especially when it comes to tough acquisitions in which the company must make deals with members of the board of directors and accurately gauge a tangle of market reactions.

Hostile Takeovers Hostile takeovers can reduce overall company goodwill and may result in the loss of customers that both companies previously had.

References 3 Go 4 Funding: Advantages and Disadvantages of Leveraged Buyout Quora: What are the pros and cons of a startup being acquired by a large company? The Benefits of Buying a Business versus Starting a New Business.

Suggest an Article Correction. How to Write a Business Plan for an Acquisition. Logo Return to Top. Contact Customer Service Newsroom Contacts. Connect Email Newsletter Facebook Twitter Pinterest Google Instagram. Subscribe iPad app HoustonChronicle.