Acquisition refers to the process of one company purchasing or taking over another company, often to expand its operations, gain assets, or increase market share.
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Last Updated: January 21, 2026
The definition of acquisition in a business context is the act of one company purchasing control of another. Acquiring an existing business is a popular option for businesses wanting to expand or owners wishing to retire or move on to a new venture. Acquisition involves selling some or all of a company to another legal entity or individual. In many cases, acquisitions are amicable, and the parties involved can negotiate the terms of the deal.
However, business owners face different legal requirements, depending on the type of sale that’s involved. When the purchase is an asset sale, the business sells only some of its assets, and the owner is left to wind up its liabilities. On the other hand, an equity sale transfers business ownership (stock in a corporation or interest in a limited liability company), including all assets and liabilities. Business owners will need to consider the type of sale when weighing the pros and cons of acquisition for their business.
Although acquisition has advantages, it also has several potential disadvantages for owners to consider.
When a business owner engages a buyer for their company, it’s a chance for the owner to negotiate the value of their business. An entrepreneur can choose to sell their ownership after an acquisition, meaning they can retire or start a new venture. In some cases, the owner could negotiate ongoing employment or a board seat with the acquired company. Because a new company buys the owner out, they’ll stop having responsibility for corporate formalities, self-employment taxes, and liability.
Depending on a state’s laws governing acquisitions, business owners must obtain unanimous or majority approval for an acquisition. The deal will likely go through several rounds of negotiations before closing. Sometimes, advanced business dealings take an owner away from their time spent running the business. If the business owner’s company will suffer during their absence, they might face legal consequences.
In addition, depending on the type of sale, the former owner may owe taxes on your profits from the transaction. A seller usually pays a lower federal income tax rate on capital gains in an equity sale. However, the lower rate isn’t always available in an asset sale. Further, some sellers recognize tax benefits by receiving stock compensation rather than cash.
More importantly, after an acquisition, the seller loses the power to make decisions about the company. Sometimes the buyer will have a different vision and objectives. Depending on the terms of the deal, the previous owner won’t be able to protest if the buyer makes changes after the deal is closed.
Corporate acquisitions are common in big business. Here are a few well-known acquisition examples:
Companies may acquire a business to access its client base, operations, or market presence. Acquiring a small business as it reaches its full potential allows a larger business to capitalize on the value of the company’s performance.
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The acquisition is a popular strategy for a business owner to sell their company and realize its value. However, it’s wise to consider the benefits and drawbacks of any deal before approving an acquisition.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
Written by ZenBusiness Editorial Team
The ZenBusiness Editorial Team has more than 20 years of combined small business publishing experience and has helped over 850,000 entrepreneurs launch and grow their companies. The team’s writers and business formation experts are dedicated to providing accurate, practical, and trustworthy guidance so business owners can make confident decisions.
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