Asset Acquisition Strategy Definition
In an asset acquisition strategy, a company attains growth or expansion through the purchase of other companies or their assets. This strategy is different from the organic growth strategy where growth is through sales, products diversity and others. The above strategy is used by various companies, it is key in roll-up mergers.
A Little More on What is an Asset Acquisition Strategy
This is a medium for companies to attain accelerated growth in sales, capacity, profits, and others. A company considers different elements of a strategy like if the strategy provides new market asides the existing ones, offers a new service or makes the company ahead of competitors. The overall aim is to gain profits and reduce overlapping costs when an asset is acquired.
Another benefit is to acquire a company that offers a product or service related to the buyer company range of products or services with promising sales or a new geographical market. Companies will not be willing to buy an asset that has little impact on them or an asset whose purchase will incur debt on the company. Also, the company will consider how the acquired asset will be integrated and monitored to maximize profit. It is also important to note the acquired asset’s contribution to the existing company’s cash flow or earnings per share (EPS) and others. This helps the company to put in place measures when other assets are acquired. As explained, purchase price and financing measures is another element to consider in an asset acquisition.
Example of an Asset Acquisition Strategy
VCA Antech is a chain business of veterinary clinics and diagnostic laboratories, founded in 1986 as Veterinary Centers of America. After two years of inception, they acquired Antech Diagnostics. They have been able to acquire many veterinary clinics but in 2017, they were acquired by Mars Inc. VCA Antech in the ‘90s expanded and consistently increase in economies of scale specifically on the cost side, as the growth improved its price negotiation power with suppliers to animal clinics. VCA Antech succeeded in maximizing profits for its shareholders. Note that, strategies might be successful or not dependent on design or execution.
Reference for “Asset Acquisition Strategy”
Academic research on “Asset Acquisition Strategy”
A different look on risks by property investments, Keeris, W. G. (2008). A different look on risks by property investments. Journal of European Real Estate Research, 1(2), 151-161. This paper aims to focus on three points of the theory about property investment risks: the management risk is not taken into account; the assumed regularity of the damping of the specific risks with an increase in the number of investments; and the assumption that the market risk is constant.
What assets should the Federal Reserve buy?, Broaddus, J. A., & Goodfriend, M. (2001). What assets should the Federal Reserve buy?. FRB Richmond Economic Quarterly, 87(1), 7-22. The Fed’s asset acquisition practices should adhere to two closely related principles that would support monetary policy by strengthening the Fed’s independence: asset acquisition should respect the integrity of fiscal policy and minimize the risk of political entanglements involving Fed credit allocation. Restricting Fed assets to Treasury securities conforms well to both principles. By extending its credit to the Treasury, the Fed minimizes its participation in private credit markets and transfers directly to the government all the revenue (net of the Fed’s operating expenses) from money creation. The authors propose that the Fed and the Treasury cooperate, under the auspices of Congress if need be, to enable the Fed to continue to rely on Treasury securities even as the publicly held debt is paid down.
Wealth effects of US acquisitions in the Pacific Rim, Gleason, K. C., Gregory, D. W., & Wiggins III, R. A. (2002). Wealth effects of US acquisitions in the Pacific Rim. The Journal of Business and Economic Studies, 8(2), 28.
An Exploration to the Factors Affecting China’s Mergers and Acquisitions Costs, Chen, T., & Pan, X. (2019). An Exploration to the Factors Affecting China’s Mergers and Acquisitions Costs. Archives of Business Research, 1(1). This article is an exploratory study. We explore and discuss the influencing factors that affect the merger and acquisition (M&A). We analysis and comment the valuation in the M&A process, and whether it is worth to do the M&A. We first introduce the topic and research motivation and methods. Then we introduce the process and realization of M&A, and how to evaluate the M&A. Further, we talk about the influence factors in M&A, not only in the financial way, but in a broader market ken. In the last, we make suggestions on how to reduce the risk for a successful M&A.
Asset Specificity, Partnerships and Global Strategies of Information Technology and Biotechnology Firms in India, Ruet, J. (2007). Asset Specificity, Partnerships and Global Strategies of Information Technology and Biotechnology Firms in India. Globalisation in China, India, and Russia: Emergence of National Groups and Global Strategies of Firms, 299.
Reading the framing of financial crisis, Wan-Soo, L., Chan-Souk, K., & Jae-Woong, Y. Reading the framing of financial crisis. kpss, 139. This study was carried out to determine the viewpoints from which published texts framed, configured, and interpreted the historically unprecedented global financial crisis that erupted in the United States in September 2008. In this paper, related books published in the Korean publication market in the period after the global financial crisis were studied in terms of how they reinterpreted the issue of global financial crisis within certain frames and which attributes they emphasized in evaluating and understanding the issue. The main findings of the analysis were as follows. First, the frames for interpreting the causes of the financial crisis were one of financial system inadequacy, which led to the subprime mortgage crisis and the bankruptcy of Lehman Brothers. The limits of capitalism also appeared as a central frame in interpreting the cause of the crisis. Second, the dominant frame involved a moral appraisal of the financial crisis in terms of the greed of individual investors and moral hazard. Third, the structure of conflict represented in Korean publications involves a frame that focused chiefly on conflicts between the U.S. and Asian countries.