An acquisition on the other hand, is when one business takes possession of another business–AKA a buyout or takeover.  Many people mistakenly term acquisitions as mergers.  When one business actually buys the other and folds it into its own business model, this is an acquisition.

Joint ventures are when two or more companies enter a contractual agreement to pool their resources for the purposes of one specific business enterprise.  In a strategic alliance, however, two or more companies would join forces with each other to accomplish ongoing goals such as getting better prices for goods by buying products in bulk together.  This way, the companies are minimizing their risk by maximizing the leverage the command when negotiating with third parties.

Partnerships occur when two or more individuals enter an agreement to carry on a continuing business enterprise for profit as co-owners.  Partnerships are legally considered as groups of individuals rather than single business entities and each partner files their share of the business profits on their own individual tax returns.

Mergers and acquisitions have exploded over the past couple of decades.  For many small companies, being acquired is a potentially lucrative way to achieve long-term growth.  In an economic world where product development has become more and more costly, mergers and acquisitions can also be an efficient way for companies to enter new markets.  Acquisitions also provide the opportunity to expand existing customer bases, which will lead to a more profitable bottom line overall.

Of course, there are downsides to mergers and acquisitions.  Not only can they cost an incredible amount of time and money, but they can also lead to legal and tax complications, not to mention the difficulty with mingling two separate corporate cultures into one new whole.  It’s vital to gain expert legal and tax advice before entering into a merger/acquisition, and making sure to implement all strategies in as efficient a manner as possible to maximize the new business entity’s chances for success.