Sign up for
Get started

What is acquisition?

Definition: Acquisition is a business transaction between two companies, with the aim of one company buying or taking control over the other. The “mother” company can acquire the “target” company by purchasing assets or shares through a buyout or tender offer.

The benefits of the acquisition are usually mutual if both sides agree. When bigger companies buy smaller ones, the former gets the innovative technology and an experienced team, while the latter gets the resources and market value of the bigger company.

Acquisition types

There are 4 acquisition types, according to the target company's position:


The target company is somewhere along the supply chain ( vendor — supplier), and the benefit of this acquisition is improving the mother company’s supply chain. 

Adobe acquiring Workfront is an example of vertical acquisition.


The target company is a competitor at the same point in the supply chain. The benefit of the horizontal acquisition is expanding the product offer and decreasing competition. 

Disney’s acquisition of Pixar and Salesforce's acquisition of Tableau Software are good examples of horizontal acquisition.


The target company is not in the same industry as the acquiring company, and the benefit of this acquisition is diversifying business streams and entering a new market. 

Zoom acquiring Keybase was an example of a conglomerate acquisition.


The acquiring company is expanding its market by buying a company in the same industry but with different lines of products. 

In the SaaS industry, one of the recent congeneric acquisitions is DocuSign acquiring SpringCM to gain access to new technology.

Common reasons for acquisition

Competitive advantage

Acquiring a brand in the same industry or a completely different one benefits a company by giving it a competitive advantage.

 If the target company has a strong brand identity and good market position, the acquiring company gets exclusive access to its target audience.

Expansion & Diversification

Expansion of a company directly means an increase in revenue because the company isn’t relying on one product or market. 

By diversifying and expanding, the company can increase market reach and reduce the risk of failure.

Cost saving

After the acquisition, the mother company will cut costs in multiple fields, such as marketing, operations, and development of the products. Combining the two companies' operations leads to cost saving in supply chain management, logistics, marketing team, etc.

Examples of acquisitions

Microsoft acquired Nuance Communications

Microsoft acquired Nuance communications (a company providing speech recognition and Ai technology) in 2021. The acquisition was successful because Microsoft gained knowledge and new technology surrounding Ai.

Salesforce acquired Slack

Salesforce (a CRM platform) acquired Slack (a team collaboration tool) to create an all-in-one platform for both customer engagement and team collaboration in the future.

Difference between acquisition, merge, and takeover

Even though the terms acquisition, merge, and takeover are often used interchangeably, there is a slight difference. 

Acquisitions” happen when both parties favor one taking over the other and agree to the terms. 

Takeover” means that the target company doesn’t agree with the transaction, while “merge” means the two entities are blended and form a completely new one. 

Wonder what your customers want?
Discover Mindmesh

Article FAQs

What is the acquisition fee?
The acquisition fee covers the legal, financial, and other costs related to the process of acquiring the target company. The acquiring company usually pays the acquisition fee, but sometimes the shareholders or the target company split the fees.

Recommended Terms


Get started

Hundreds of tech workers have already
tried Mindmesh and use it daily

Get Started

A monthly newsletter delivered straight to your inbox