ACQUISITION

6 May 2016 By PDSNET

This is when one company acquires more than 50% of the shares of another or obtains a controlling interest in its shares. 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. The JSE rules require that if a listed company makes an acquisition which has a value of 30% of its market capitalisation or more, then the value of the purchase must be disclosed. 



Share this glossary term: