Indirect Acquisition
An indirect acquisition is a takeover strategy in which an acquirer purchases a majority ownership stake in a target company through the acquisition of an existing shareholder or a business partner. Through an indirect acquisition, the acquirer is able to gain control of the target company without having to launch a direct public takeover offer. An indirect acquisition may also be referred to as a friendly takeover or a private-equity takeover.
Indirect acquisitions can be structured in a number of different ways depending on the particular situation. The most common form of an indirect acquisition is known as a “rolling acquisition.” In a rolling acquisition, the acquirer buys out the minority shareholders in increments over time, eventually gaining a controlling stake in the target company. Another common approach is to buy out the target company’s majority shareholders, creating a situation known as a “reverse takeover”.
There are several advantages to indirect acquisitions. The most obvious advantage is that they allow the acquirer to gain control without making a public offer, which would require significant resources and potentially involve hostile elements. An indirect acquisition also avoids issues with security regulations and provides the acquirer with more flexibility in terms of the structure of the transaction.
In addition, indirect acquisitions can also have certain tax advantages. The acquirer may be able to claim certain tax breaks for transactions related to the acquisition and has more control over the timing and structure of the transaction. The acquirer is also able to avoid potential issues with securities regulations and disclosure to shareholders.
However, there are also certain risks associated with indirect acquisitions. Acquiring a business through an indirect acquisition is a complex process that relies on the cooperation of existing shareholders. If the acquirer is unable to gain the cooperation of all shareholders then the transaction may not be successful. In addition, the acquirer may encounter issues related to financing and legal matters if the transaction is not structured properly.
Overall, an indirect acquisition is a viable strategy for gaining control of a target company without the need to launch a public takeover offer. It carries certain advantages, such as tax benefits, as well as risks such as an inability to secure the cooperation of all shareholders. Proper due diligence is essential to ensure that any proposed transaction is structured properly and meets the acquirer’s objectives.
