Types of Acquisition – Shares Acquisition
The ownership of the target firm is transferred through a share purchase where the buyer buys all or most of the target company's shares. The buyer and the owner(s) of the shares (the seller(s)) enter into a sale and purchase agreement. The target company still owns and manages the business and is generally in exactly the same condition as it was before the acquisition. Whatever assets, liabilities, rights, or obligations the target company had prior to the acquisition would still be there. Individual shareholders, corporate shareholders, or a combination of both may be the sellers. A group structure is used to run many firms since they are owned by other enterprises. The fact that each company within the group is an independent legal entity with limited liability is a big part of what makes operating through a group of companies appealing over operating through divisions of a single firm. For instance, unless it has decided to bear liability for them or there are other exceptional circumstances, the parent firm is not accountable for the debts of its subsidiaries. A target firm is referred to as a "whollyowned subsidiary" if another organisation (the target business's "holding company") owns all of its shares in the target company. In this instance, the holding company is the sole vendor. To be a holding company, a company does not necessarily need to own all of the shares of another company. Under Section 1159 of the Companies Act 2006 (CA 2006), two companies are categorised as holding companies and subsidiaries under English law if one effectively controls more than half the voting rights in another. Although effective control would be transferred if this controlling shareholding were sold, the buyer will often desire to purchase the entire issued share capital of the business. Therefore, the owners of the remaining shares will join the holding company in this scenario as a seller in the acquisition transaction. Thus, the selling can be a combination of institutional and private investors. An individual (or individuals) or, perhaps more frequently, a business might purchase the shares. The target company becomes a wholly-owned subsidiary of the buyer if another business buys all of its shares. A buyer will typically want to purchase all of the target company's shares, but if that is not possible, for instance because some shares are held by a shareholder who won't sell, the buyer may still proceed and purchase the majority of the target's shares, giving them control even though they will have to deal with the inconvenience of a dissident shareholder within the company. If the target firm has a subsidiary, or if it holds shares in another company, then ownership of that subsidiary will transfer together with the target's other assets.
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