Term: ACQUISITION

This is when one company acquires more than 50% of the shares of another. The company acquiring the shares then becomes the “holding company” and the acquired company becomes a “subsidiary”. Once a company acquires another company, it is required by the Companies Act (71 of 2008) to consolidate that company’s financial statements to produce group financial statements. In practice, most companies listed on the JSE are “groups” consisting of many different related businesses. A company can grow either organically or by way of acquisition. Growing by acquisition is far quicker, but carries the risk that the acquired company may not be a good fit with the parent.

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