A tuck-in acquisition often referred to as a “bolt-on acquisition,” is a type of acquisition in which the acquiring company merges the acquired company into a division of the acquiring entity.
Why Do Companies Need Bolt-on Acquisition?
When a joint-stock company decides to issue new shares and sell them on the market, it certainly expects to receive additional cash injections into the business. It is assumed that the shares will then be repeatedly traded and as a result, the market will determine – through the price of shares – the market value of the company and its capitalization (product of the market price of shares by their number).
In modern conditions, the economic life of society is unthinkable without a bolt-on acquisition. The more successful, sustainable enterprises are created in a country, the more stable its economy. In the next topic, we will consider in detail the existing classification of enterprises, which will allow us to penetrate even more deeply into the specifics of the activities of commercial organizations, to study all their diversity and development trends.
The higher the capitalization, the more transparent the company’s exchange history, the larger and cheaper the loans that it can receive domestically and abroad, the easier it is to bring shares (in the form of depositary receipts) to the largest exchanges of other countries, the more expensive they will be for foreign investors and will bring a great return on investment in the renovation of production.
However, a bolt-on acquisition is a lot of small companies. Open joint-stock companies have immeasurably more advantages from the growth in the number of shareholders. On the contrary, they seek to share their influence with new mass shareholders, increase their authorized capital at the expense of proceeds from the sale of securities, enter the open market with the issue of shares, ensure their constant quotation in the future and the possibility of wide circulation on the stock exchange. That is, to make the share capital available to a public investor, thus placing the company under the control of the market.
The Main Goals of a Bolt-on Acquisition
Any bolt-on acquisition does not exist by itself but is connected with the economy as a whole, on the one hand, through the market of production factors, on the other, through the sales market, and therefore the economy of the enterprise must investigate the relations of individual enterprises with other economic units, with the market. Economic science examines the economic process both as a whole and from the standpoint of the interests of an individual enterprise.
To better understand what is a bolt on acquisition, it is recommended to check what it will help you with:
- main goals, objectives, and tools for managing the economy of the enterprise and its individual processes;
- domestic and foreign experience in the field of rational organization and management of the enterprise’s economy;
- a system of factors of the external and internal environment that affect the economy of the enterprise;
- modern methods of strategic planning and assessment of the efficiency of the enterprise;
- sources of financing for the current and investment activities of the enterprise;
- mechanism and levers of state influence on the economy of enterprises.
Besides, at the moment, many analysts are paying attention to the rapidly growing improvement of old and to the emergence of new information, which constitute a real weapon and a danger to the intelligence of an individual and the people as a whole, its army, law enforcement agencies, and governing authorities.