What is an Acquisition?

An acquisition is one company taking a controlling stake in another, usually 50 percent or more.

How does an acquisition work?

The buyer pays in cash, stock, or both. Diligence checks the books, lawyers paper the deal, and anything paid above the company’s book value lands on the balance sheet as goodwill. Once it closes, the acquirer calls the shots.

Why do acquisitions matter?

Acquisitions are how most startup stories actually end. IPOs get the headlines, but the overwhelming majority of venture-backed exits are sales to a bigger company. Your investors are underwriting that outcome from day one.

Where did acquisitions come from?

M&A waves go back to the railroad and oil consolidations of the late 1800s, which is also where American antitrust law was born. Tech didn’t invent the playbook. It industrialized it.

How do you handle an acquisition well?

Build relationships with likely buyers years before you need them. Keep clean books and a clean cap table. And remember the best exits are bought, not sold: acquirers pay up for companies that didn’t need to sell.

Bottom line: an acquisition is an outcome you earn by building something that works on its own.

For more startup terminology, visit startupdefinitions.com.