Scale Acquisitions

The primary objective of a scale acquisition is to increase the size of the company by acquiring a similar business within the same industry.

In scale acquisitions companies typically eliminate overlapping costs, leverage their combined resources, and improve their position in the industry.

These acquisitions are generally integrated, except when the operations are in different locations.

Some refer to scale acquisitions as vertical transactions, in particular when the primary objective is to improve production.

Acquisitions of a similar business in a different geographic market would generally be considered scale acquisitions.

Companies that complete a series of scale acquisitions are often said to be pursuing a “rollup” strategy.

A one-off “tuck-in” acquisition may be pursued to supplement the scale of the existing business.

Scope Acquisitions

The primary objective of a scope acquisition is to increase the breadth of the company’s offerings by acquiring a different type of business with complementary products or services.

In scope acquisitions the aim is typically to broaden the company's capabilities, capitalize on cross-selling opportunities, and reach new customer segments.

These acquisitions may not be fully integrated, in particular at the product and service level, although the goal is often to leverage existing operations and profit from adjacent or related activities.

Acquisitions to diversify revenue streams may also be considered scope acquisitions.

A “tuck-in” acquisition may be pursued to add new technology or capabilities to the scope of the business.

A “transformational” acquisition fundamentally alters the scope of the company’s offering and / or strategic direction.

Standalone Acquisitions

The primary objective of a standalone acquisition is to consolidate the target’s profit distributions.

In standalone acquisitions the company’s aim may be to diversify the company's sources of revenue, financial risks, and / or leverage the balance sheet.

Standalone acquisitions typically see the management team, brand identity, and operational structure maintained post-close.

Acquisitions in a distinct market, with a unique culture or customer base, or specialized assets, or to serve as a platform for future expansion may be operated on a standalone basis.

Acquisitions of assets that might be compromised during a full integration may also be operated on a standalone basis.

Minority Investments

The primary objective of a minority investment may be strategic, financial, or both.

These transactions provide limited control, but they generally include certain governance rights, which may include rights to acquire the company in the future.

Some minority investments are made through Corporate Venture Capital (CVC) structures and include co-investments with venture capital firms, founders, and other institutional investors.

Minority investment structures may be executed through direct equity purchases, convertible debt, and warrants, among other securities.

Joint Ventures

The primary objective of a joint venture (JV) is to combine resources, expertise, and capital with another company to pursue a strategic or financial objective.

JVs are generally used to broaden the company's scope and / or scale, while sharing the risks, profits, and governance responsibilities.

Upon formation, the JV partners generally contribute assets and / or capital to a new entity.

The accompanying operating agreement typically outlines the specific process for dissolving the JV in the future.

Divestiture Sales

The primary objective of a sale is to divest a business unit, subsidiary, or asset to another company.

These transactions may be completed with private equity firms, strategic acquirors that pursue scope or scale deals, management team, conglomerates that pursue standalone acquisitions, or special purpose acquisition companies (SPACs).

In an equity carveout, a minority stake is divested to an outside investor or another company.

These transactions are typically taxable.

Divestiture Spinoffs

The primary objective of a spinoff is to divest a business unit, subsidiary, or asset to a new independent company with the shares distributed to the existing shareholders.

These transactions can involve significant upfront costs and preparation to establish the infrastructure for the new company and / or an ongoing transitional service agreement (TSA).

A spinoff can also be completed through an initial public offering (IPO) or a carve-out divestiture by selling a partial interest to outside investors.

These transactions are typically tax-free.