There are several reason why companies seek out acquisitions
, including gaining access to new business or technology, to gain an understanding of or root into a particular market or to learn a particular skill or capability identified as useful.
One of the ways to acquire a business is to acquire shares. This brings with it a number of rewards in itself. The benefits of making the acquisition of shares in a company as opposed to purchasing the business and assets of that company can be detailed below in the first part of our 'Company Acquisitions' Guide. This first edition details the advantages of making an acquisition by purchasing shares.
Founded in 1990, ADAM Communication Systems International Limited (ADAM) design and manufacture Building Energy Management Systems (BEMS) for multi-building operators world-wide. Adam provide a fully managed post-installation service - SMARTsupport - targeted at delivering further customer benefits in terms of business critical alarm monitoring, building performance analysis and maintenance management.
Managing director Stephen Dillon, who co-founded the company with technical director Joe Blower in 1990, told Insider: "It will help us execute this record-number of new orders we have and service the new ones we are receiving. We manufacture market-leading technology and this gives us the ability to exploit that. We'll also be able to increase our sales presence and target markets outside of our traditional sectors."
Tax disadvantage. Capital allowances are not available on shares during a share acquisition. The share purchaser usually acquires the assets of the selling company with a 'base cost' for capital gains tax purposes, this is equal to the price paid and capital allowances can be obtained for qualifying assets. Furthermore the companies taxable assets are based on historic data, any differences are seen in the deferred tax liability provision.
Maven made the investment through the Capital for Enterprise Fund (CfE) - the 75m government backed initiative launched in 2009 designed to help small and medium-sized businesses. Maven is managing 30m of the fund, with London-based Octopus Investments also running 30m.
Transfer restrictions. There maybe some restrictions that applies during the acquisition to the transfer of the target company's articles of association or other outstanding contractual obligations that are in place which may then lead to complications with the acquisition of shares.