Key Requirements for a Successful Tuck-In Acquisition
Benefits of tuck-in acquisition
Acquisitions and mergers are frequent occurrences in business operations. Depending on the business, they might select to carry out various kinds of acquisitions. These are some benefits of tuck-in acquisitions:
What is a tuck-in acquisition?
When a large company buys a smaller one and incorporates it into their business, this is known as a “tuck-in acquisition.” Typically, these acquisitions involve businesses operating in the same or closely related industries. Leaders in both organizations research mergers and acquisitions to see if the combination will be advantageous to both. Although the acquisition process can take time, it may ultimately benefit both larger and smaller businesses more.
A tuck-in acquisition differs from a merger. When two comparable businesses decide to merge, it is with the intention of working together. When one business purchases another, it assumes full control of all of its assets, including its facilities, machinery, business operations, and personnel. The companies involved in a merger typically share the same size and level of influence, whereas in an acquisition, one company is typically larger and more powerful than the other. This is relevant to tuck-in acquisitions, which are common in markets with rapid growth.
Tuck-in vs. bolt-on acquisition
Depending on the market and its circumstances, a company may decide to tuck in or bolt on the acquired companies. Each of the acquisitions processes includes different processes and benefits. These are some differences between tuck-in and bolt-on acquisitions:
Structure
One of the biggest differences between tuck-in and bolt-on acquisitions is the difference in the structures. The smaller company is absorbed by the larger one during a tuck-in acquisition, leaving little room for the acquired entity to keep its operations or organizational structure. In these situations, as the smaller company merges with the larger one, personnel and roles may completely change.
In a bolt-on acquisition, the bigger business takes on the smaller one and integrates it into its structure while still allowing it to function separately. While the acquisition typically keeps some leadership, the acquiring company may offer assistance and direction or make necessary adjustments for optimization. The smaller business typically retains the same personnel, operational procedures, and client relationships.
Brand names
Rarely does the larger business permit the smaller one to retain the same branding or name during a tuck-in acquisition. A large corporation may, depending on the circumstance, take ownership of intellectual property or ideas and rebrand them. Usually, in a bolt-on acquisition, the larger business permits the smaller one to retain its name and branding. This can be advantageous because it can keep a customer base and maintain brand recognition.
Benefits
The advantages of bolt-on and tuck-in acquisitions vary depending on the companies, industry, and circumstance. Tuck-in acquisitions are advantageous because they enable a business to obtain knowledge, talent, and market share. Bolt-on acquisitions are advantageous because the larger company doesn’t have to fully absorb the smaller one and can keep using its existing processes.
Tuck-in acquisition examples
Examining acquisition examples can help you comprehend what they are and how they operate. These are some tuck-in acquisitions examples:
Example 1
A company called Good & Natural Foods focuses on creating wholesome, minimally processed food items. They want to enter the vegan market, but creating a new department within their business might be expensive and time-consuming. Instead, they make a tuck-in acquisition of Not Your Average Meatz, a modest vegan meat substitute business. The processing tools and recipes can be used by Good & Natural Foods to launch their own line of vegan foods quickly.
Example 2
Dresses, skirts, shorts, and tank tops are all produced by Summer Steam Outfitters, a clothing manufacturer that specializes in clothing for warmer climates. After doing business for a while, they notice SunFlex Attire, a new summer clothing manufacturer, using a patented material that wicks away moisture and keeps you cool. To obtain the patent for this material, Summer Steam Outfitters buys SunFlex Attire through a tuck-in acquisition. Summer Steam Outfitters increases its market share and revenue potential by doing this.
FAQ
What is a tuck-in private equity?
What Is a Tuck-In Acquisition? A tuck-in acquisition is when a platform company buys a business that is typically backed by private equity. The idea that the acquisition is being “tucked in” under the framework of the platform company is conveyed by the term “tuck-in.”
What are the three types of acquisition?
Acquisitions for a high-growth business typically fall into one of three categories: (1) team buys, (2) product buys, or (3) strategic buys. Actually, businesses have a fourth option for acquisitions, known as a “synergistic” acquisition.
What is tuck-in M and A?
A tuck-in acquisition is the purchase of a smaller company and the incorporation of that company into the platform of the acquirer. The acquirer. It also involves an assumption of certain liabilities. is typically a large business that has the extensive infrastructure that the smaller business lacks.
What are the four types of acquisition?
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Here are 4 common acquisition types and why they are used in business.
- Vertical Acquisition. …
- Horizontal Acquisition. …
- Conglomerate Acquisition. …
- Market Extension Acquisitions.
