Business acquisition is a term used constantly in the mid market, but it means something slightly different depending on which side of the transaction you sit on. For a buyer, a business acquisition is a growth strategy, a way to acquire market position, capability, or scale faster than building it from scratch. For a seller, it represents an exit, a succession event, or an opportunity to realise the value built over years or decades of ownership. Understanding how the process actually works, from both perspectives, helps both parties negotiate a deal that genuinely serves their interests.
What Is a Business Acquisition?
A business acquisition is the purchase of some or all of a company by another party - such as a private equity firm, a family office, a strategic buyer already operating in the same industry, or an individual acquirer.
The transaction can take several legal forms, most commonly a share sale, where the buyer acquires the shares of the company itself, or an asset sale, where the buyer acquires specific assets and liabilities of the business rather than the legal entity.
The choice between these structures has significant tax and liability implications for both parties, which is why legal and financial advisors are involved from an early stage in any credible process. If you are on the buy side, our step-by-step guide to buying a business covers this in more depth.
What Is the Difference Between an Acquisition and a Merger?
In an acquisition, one company purchases another and the acquired business is absorbed or continues under new ownership. In a merger, two companies combine to form a new, single entity, often with shared governance between the previously separate ownership groups.
The terms merger and acquisition are often used together, and the two are related but distinct. In common usage, "merger and acquisition" typically refers to any combination of two businesses under common ownership, but there is a technical difference. In the mid market, the vast majority of transactions are acquisitions rather than true mergers, since one party is typically providing capital to purchase the other outright.
Why Do Businesses Pursue Acquisitions?
For buyers, a business acquisition is rarely about the target business in isolation. It usually serves a broader strategic purpose:
Market entry. Acquiring an established business is often faster and less risky than building a new operation from the ground up in an unfamiliar market or geography.
Capability and talent. Some acquisitions are driven primarily by the desire to acquire skilled teams, technology, or intellectual property that would be difficult to build internally.
Scale and efficiency. Combining operations can create cost efficiencies through shared infrastructure, purchasing power, or distribution networks.
Platform and add on strategy. Particularly common among private equity firms, this involves acquiring an initial platform business in a sector, then bolting on smaller add on acquisitions to build a larger, more valuable combined entity over time. Our plain-English guide to private equity explains how this plays out.
What Are the Steps in the Business Acquisition Process?
While every transaction has its own nuances, a typical business acquisition follows a consistent sequence from origination to completion.
Origination. The buyer identifies a target, either independently or through an advisor who sources and assesses opportunities that match the buyer's brief, whether on market or off market. Our guide on how serious acquirers actually find businesses to buy explains where these opportunities come from.
Confidential briefing and non disclosure agreement. Before any detailed financial information is shared, both parties agree to confidentiality, protecting the commercially sensitive information of the seller.
Information Memorandum review. The seller's advisor prepares an investment grade IM covering financials, operations, and market position. The buyer reviews this to determine whether the opportunity genuinely fits their brief.
Indicative offer. If the buyer remains interested, they submit a non binding indicative offer outlining proposed price and structure, subject to due diligence.
Due diligence. The buyer, supported by legal, financial, and operational advisors, verifies the claims made in the IM and investigates the business in detail, looking for risks that were not disclosed. See our ultimate due diligence guide for what this involves.
Negotiation and final terms. Based on due diligence findings, final price and structure are negotiated, and formal legal agreements are drafted.
Completion. Funds are transferred, ownership changes hands, and a transition plan is implemented to support the business through the change of ownership.
Common Deal Structures in Mid Market Acquisitions
Business acquisitions rarely involve a single, simple cash payment. Structures are typically blended to align the interests of both parties:
Full cash acquisition, offering a clean exit but often at a slight discount to headline value
Cash plus vendor finance, where the seller carries a portion of the price over an agreed period
Cash plus earnout, tying part of the price to future performance
Retained equity, where the seller keeps a minority stake and continues to benefit from the business's future growth
The right structure depends heavily on both parties' risk appetite, the buyer's available capital, and the seller's objectives for the proceeds. Buyers weighing how to fund a deal will find our guide on how to finance a business acquisition useful.
Where Deals Commonly Go Wrong
Business acquisitions fail, or stall part way through, for reasons that are usually avoidable with the right advisory support. The most common causes include unrealistic seller price expectations that were never grounded in market evidence, poorly prepared financial information that unravels during due diligence, misalignment on deal structure discovered too late in the process, and a lack of experienced representation on either side that allows negotiations to break down over resolvable issues. Our breakdown of the most common mistakes when buying a business covers how to avoid the errors that most often derail a deal.
Working With an Advisor Through the Acquisition Process
Whether you are acquiring a business or preparing to sell one, the process benefits significantly from experienced representation. A specialist advisor manages confidentiality, structures the deal to align both parties' interests, and keeps the process moving through the inevitable friction points that arise before completion. On the sell side, this is often where a specialist broker maximises the final sale price.
Blackmont Advisory is a boutique, senior led M&A firm based in Melbourne with a global network of buyers, investors and partners. We manage confidential sales for business owners and act as exclusive buyer advocates for those looking to acquire, never representing both sides of the same deal. That structuring expertise and independence is what turns a business acquisition from a stressful negotiation into a managed, well executed transaction.
If you are considering an acquisition or an exit, understanding the process before you begin puts you in a considerably stronger position at the negotiating table.
Buying? Register your acquisition brief. Selling? Start with a confidential valuation.
Frequently Asked Questions
What is a business acquisition? A business acquisition is the purchase of some or all of a company by another party - a private equity firm, family office, strategic buyer, or individual acquirer. It is usually structured as either a share sale (buying the company's shares) or an asset sale (buying specific assets and liabilities).
What is the difference between a merger and an acquisition? In an acquisition, one company buys another and the target is absorbed or continues under new ownership. In a merger, two companies combine into a single new entity with shared governance. In the mid market, most transactions are acquisitions rather than true mergers.
What is the difference between a share sale and an asset sale? In a share sale, the buyer acquires the shares of the company itself, taking on the legal entity and its liabilities. In an asset sale, the buyer acquires only specific assets and liabilities. The choice carries significant tax and liability implications for both sides.
What are the main steps in a business acquisition? The typical sequence is origination, confidentiality/NDA, Information Memorandum review, indicative offer, due diligence, negotiation of final terms, and completion with a transition plan.
Why do business acquisitions fail? Common causes are unrealistic seller price expectations, poorly prepared financials that unravel during due diligence, misalignment on deal structure found too late, and a lack of experienced representation on either side.