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What is Acquisition?

Acquisition: One company buys control of another.

Where Acquisition fits

Acquisition is part of Valuation & Deals in Finance. Valuation estimates what a business is worth. Mergers and acquisitions are checked by due diligence, and present value converts future cash into today's money.

Practical tip

Never pay more than discounted future cash, and verify claims before signing.

Related terms

Due diligence
Careful checking of a deal before committing.
Merger
Two companies join to form a single new one.
Goodwill
Extra value paid in an acquisition above the worth of identifiable assets.

Formulas you will use with it

Debt-to-equityWACCOne-year NPVPresent value

Test yourself

Which term means: “One company buys control of another.”?

Goodwill · Acquisition · Due diligence

Answer: Acquisition

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