The process by which one company becomes the owner of another is called a takeover or acquisition since the process of buying is realised through the acquisition of over 50% of a company’s shares. These changes come about as a result of a strategic decision on the part of the company’s management. In business, growth still means going down, and the only way to stay afloat is by growing through taking over or itself being taken over by a bigger system.
Perceived cons of a takeover differ from case to case but may include reduced competition and choice for consumers, fears of price increases and job cuts as well as problems arising from cultural integration and conflict with new management. Advantages of growth through takeovers rather than organic growth are numerous; a company can spread its business through a well-established system as, even when on the brink of bankruptcy, the company which has become a target still has valuable assets and infrastructure that can add value to the new owner. This value can be seen as an increase in sales, market share and economies of scale.
Apart from that, the acquired company can be a way of entering new markets and expanding brand portfolio. Thus, as any other undertaking, takeovers involve risks but they seem to be worth taking. It might be that due to those risks, a company’s management may oppose the idea of their company passing into the hands of rivals, in which case we speak of a hostile takeover. Croatian companies often become takeover targets. Pliva, for instance, inspired a bidding battle which saw the price of its shares increasing as the interested parties were trying to outbid each other.
