Acquisition of shares of another company by a company (2023)

15 USC 18: Acquisition by a corporation of shares in another corporationThe text contains the laws in force on February 22, 2023


Pair of chickens:credit sourceSeveralreferences in the textchangesEffective Date

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§18. Acquisition by a company of shares in another company

No person engaged in trading or any activity affecting trading may acquire, directly or indirectly, all or any part of the stock or other assets, and no person subject to the jurisdiction of the Federal Trade Commission may acquire all or any part of the acquire assets of others. Person also engaged in commerce or any activity affecting commerce, if in any industry or activity affecting commerce in any part of the country the effect of the acquisition could be to significantly increase competition decrease or tend to create a monopoly.

No person may acquire, directly or indirectly, all or any part of the stock or other common stock, and no person subject to the jurisdiction of the Federal Trade Commission may acquire all or any part of the property of any person or persons engaged in trading or any Activity affecting trading if in any industry or activity affecting trading in any part of the country the effect of such acquisition of such shares or assets or use of such shares by voting or granting of powers or on other way, it can be to significantly reduce competition or create a monopoly.

This section does not apply to persons who purchase such shares solely for investment purposes and who do not use them by voting or otherwise causing or attempting to cause a material reduction in competition. Nothing contained in this section shall prevent any entity engaging in or affecting any trade which causes the formation of any subsidiary for the effective conduct of its direct lawful business or its natural and lawful branches or extensions, or from obtaining them to own and maintain all or a portion of the stock of such subsidiaries unless the effect of such formation is to substantially reduce competition.

Nothing herein shall be construed to prohibit a general carrier subject to the laws governing commerce from assisting in the construction of branches or short lines intended to become feeders to the company's main line, in such construction assist or to acquire or own all or part of the inventory of such branch lines, nor shall they prevent a joint carrier from purchasing and holding all or any part of the inventory of a branch line or short haul route constructed by an independent company if not a substantial one competition between the company that owns the branch line being built and the company that owns the main line through the acquisition of ownership or an interest in it, nor prevent it from developing one of its lines through the acquisition of shares or otherwise of another public transport company , if no competition inheritance between them is between the company expanding its lines and the company whose shares, land or holdings are so acquired.

Nothing in this section shall affect or affect any right heretofore lawfully acquired:offered, that nothing in this section shall be construed or construed as authorizing or authorizing anything previously prohibited or declared illegal by antitrust laws, or to exempt any person from any criminal provision or civil remedy provided herein.

(Video) What does "Mergers & Acquisitions" mean?

Nothing in this section applies to transactions duly completed pursuant to the authority granted by the Secretary of Transportation, the Federal Energy Commission, the Land Transportation Board, the Securities and Exchange Commission in exercising their jurisdictionSection 79j of this title,1the United States Maritime Commission or the Secretary of Agriculture pursuant to any statutory provision conferring such authority on such commission, council or secretary.

(October 15, 1914, no. 323, §7, 38 Stat. 731;December 29, 1950, no. 1184, 64 state. 1125;Bar. L. 96–349, §6(a), 12. Sept. 1980, 94 Stat. 1157;Bar. L. 98–443, §9(l), 4. Oktober 1984, 98 Stat. 1708;Pub. L. 104–88, Title III, §318(1), Dec. 29; 1995, 109 Stat. 949;Pub. L. 104–104, Title VI, §601(b)(3), Feb. 8, 1996, 110 Stat. 143.)

editorial notes

references in the text

Article 79j of this title, to which the text refers, has been revoked byPub. L. 109–58, Titel XII, §1263, 8. August 2005, 119 Stat. 974.


1996-Bar. L.104–104,In the sixth paragraph, "Federal Communications Commission" was deleted after "Secretaría de Transporte".

1995-Bar. L.104-88,in the sixth paragraph, "Surface Transportation Board" was replaced by "Interstate Commerce Commission" and "Board" was inserted after "this authority has been conferred upon this Commission."

1984-Bar. L.98–443replaces "Secretary of Transport" with "Civil Aeronautics Directorate" and "Commission or Secretariat" with "Commission, Secretariat or Directorate" in Inc.

(Video) Company Acquisition of Own Shares

1980-Bar. L.96–349,"Person" has been replaced with "Company" whenever it appears in the first and second paragraphs; replaced "persons" with "companies" in the second pair. and first movement of the third pair.; and "or in any activity involving commerce" was inserted after "commerce" whenever it appears in the first, second, and third paragraphs.

1950- Law of December 29, 1950, general section amended to prohibit the acquisition of all or part of the assets of another company if the effect of the acquisition significantly restricts competition or creates a monopoly.

Legal and related ancillary notes

Effective date of the 1995 Amendment

change throughBar. L.104–88dated January 1, 1996, see Section 2 of theBar. L.104-88,set as an effective date note belowSection 1301 of Title 49, Traffic.

Effective date of the 1984 amendment

change throughBar. L.98–443from January 1, 1985, see Section 9(v) ofBar. L.98–443,defined as a low noteTitle 5 Section 5314, government organization and employees.

Effective date of the 1980 Amendment

Bar. L. 96–349, §6(b), 12. Sept. 1980, 94 Stat. 1158, provided that: "Amendments to this section [amendment to this section] shall apply only with respect to purchases made after the date of enactment of this Act [September 12, 1980]."

role transfer

The Federal Energy Commission was dissolved and its functions, personnel, property, funds, etc., were transferred to the Secretary of Energy (except for certain functions which were transferred to the Federal Energy Regulatory Commission).Sections 7151(b), 7171(a), 7172(a), 7291 and 7293 of Title 42, public health and well-being.


The administration of shipping was transferred from the Department of Commerce to the Department of Transport and all related functions of Secretary and other officers and offices of the Department of Commerce were transferred to the Department of Transport by the Maritime Act and vested in the Minister of Transport 1981,Bar. L. 97–31, 6. August 1981, 95 Stat. 151, which was partially revoked byBar. L. 109-304, §19, October 6, 2006, 120 Stat. 1710. verSection 109 of Title 49, Traffic.

executive documents

role transfer

The executive and administrative functions of the Maritime Commission were delegated to the President of the Maritime Commission by Reorg. Plan No. 6 from 1949, e.g. August 19, 1949, 14 F.R. 5228,63 State. 1069, which was revoked byBar. L. 109-304, §19, October 6, 2006, 120 Stat. 1710, and was previously defined in the Appendix to Title 5, Organization and Government Employees.

United States Maritime Commission abolished by Reorg. Plan No. 21 from 1950, e.g. May 24, 1950, 15 F.R. 3178,64 State. 1273, which has been partially replaced by Reorg. Plan No. 7 of 1961, §305, ef. August 12, 1961, 26 F.R. 7315,75 State. 840, partially revoked byBar. L. 109-304, §19, October 6, 2006, 120 Stat. 1710, and remains only partially defined in the Appendix to Title 5. reorg. Plan No. 21 of 1950 delegated part of the functions of the Commission and part of the functions of its President to the Federal Maritime Council and its President, this Council being created by this Plan as an agency within the Department of Commerce with independent status in some respects and delegated the remainder of the functions of said Commission and the functions of its President to the Secretary of Commerce, with the Secretary being given powers to authorize their execution by the Maritime Administrator (the head of the Maritime Administration, who was also established by the plan in the Department of Commerce) with the provision that the President of the Federal Maritime Council is ex officio the named administrator.

§ 304 Reorg. Plan No. 7 from 1961, e.g. August 12, 1961, 26 F.R. 7315,75 State. 840, established in the Annex to Title 5, the Federal Shipping Council, including the offices of the members of the Council, expired. Tasks of the Council, which were transferred to the Federal Shipping Commission by Art. 103 of the Reorg. Plan No. 7 of 1961, which was repealed by theBar. L. 109-304, §19, October 6, 2006, 120 Stat. 1710and previously set out in the Appendix to Title 5 or the Secretary of Commerce under Section 202 of the Reorg. Plan No. 7 of 1961 contained in the annex to Title 5.

1See references in text note below.


What if the company buys the shares of another company what is it called? ›

An acquisition is a business combination that occurs when one company buys most or all of another company's shares. If a firm buys more than 50% of a target company's shares, it effectively gains control of that company.

What percentage of shares do you need for a takeover? ›

The goal of the takeover by the acquirer is to achieve at least 51% ownership in the target company's stock. The strategies used in a hostile takeover can create additional demand for shares while creating an acrimonious battle for control of the target company.

What happens to my shares if the company is acquired? ›

The closing

If the transaction is being paid in all cash, the shares should disappear from your account on the date of closing, and be replaced with cash. If the transaction is cash and stock, you'll see the cash and the new shares show up in your account.

What are the 4 types of acquisitions? ›

There are four main types of acquisitions based on the relationship between the buyer and seller: horizontal, vertical, conglomerate, and congeneric.

Can a company buy shares from another company? ›

A stock-for-stock merger occurs when shares of one company are traded for another during an acquisition. When, and if, the transaction is approved, shareholders can trade the shares of the target company for shares in the acquiring firm's company.

What is difference between merger and acquisition? ›

An acquisition is a cycle wherein one organisation assumes or takes over the responsibility for another organisation. A merger is a cycle wherein more than one organisation's approach functions as one. No new shares are issued in case of acquisitions. New shares are issued in case of mergers.

What is the 30% rule in the Takeover Code? ›

The Takeover Code deems “control” of a target to arise when a buyer acquires shares carrying 30% or more of the voting rights.

What is the 30% rule public acquisition? ›

The equality principle underpins the mandatory offer Rule, which requires any person who acquires interests in shares carrying 30 per cent or more of the voting rights in a target to make a general offer to all shareholders at the highest price it has paid in the previous 12 months.

What percentage of shares do you need to control a company? ›

A shareholder has controlling interest in a business when he or she owns more than 50% of the company's voting shares, giving him or her the deciding voice in shareholder meetings and control over company direction. Voting shares allow shareholders to participate, speak and vote in shareholder meetings.

What happens when a company acquires another company? ›

Unlike mergers, acquisitions do not result in the formation of a new company. Instead, the purchased company gets fully absorbed by the acquiring company. Sometimes this means the acquired company gets liquidated. Acquiring a business is similar to buying an existing business or franchise.

Do acquisitions destroy shareholder value? ›

Yet research shows most mergers fail—destroying shareholder value and costing companies billions in dollars. Over the decades, multiple studies have shown that most mergers and acquisitions fail to generate the anticipated synergies—and many actually destroy value instead of creating it.

What are the 3 processes in acquisition? ›

The Department of Defense (DoD) Acquisition Process is one of three (3) processes (Acquisition, Requirements, and Funding) that make up and support the Defense Acquisition System and is implemented by DoD Instruction 5000.02 “Operation of the Adaptive Acquisition Framework” and DoD Instruction 5000.85 “Major Capability ...

What are the three phases of the acquisition process? ›

The services acquisition process consists of three phases—planning, devel- opment, and execution— with each phase building upon the previous one.

Why would a company buy shares in another company? ›

A company repurchases its shares when it wants to consolidate ownership, preserve stock prices, return stock prices to real value, boost financial ratios, or reduce the cost of capital.

Why do companies buy shares of other companies? ›

Share buybacks enable companies to generate additional shareholder value. Under regular market conditions, the portion of profits that a company uses to buy back shares has a positive effect on the share price. For instance, a listed company has 1,000 shares of which a shareholder owns 100 (a 10% stake).

What are the legal requirements for buyback of shares? ›

Conditions of Buy-back:

Up to 10% of Paid-up capital + Free Reserves + Securities Premium – Pass Board Resolution. b. Up to 25% of Paid-up capital + Free Reserves + Securities Premium – Pass Special Resolution. 3) Buy-back should not be more than 25% of the total paid up capital and free reserves of the company.

Why is acquisition better than merger? ›

The acquiring company is larger and financially stronger than the target company. There is dilution of power between the involved companies. The acquiring company exerts absolute power over the acquired one. The merged company issues new shares.

What is an example for acquisition? ›

An acquisition is a transaction whereby companies, organizations, and/or their assets are acquired for some consideration by another company. Some examples of acquisitions include: Google's $50 million acquisition of Android in 2005. Pfizer's $90 billion acquisition of Warner-Lambert in 2000.

What can go wrong with a merger or acquisition? ›

Both mergers and acquisitions can damage your own business performance because of time spent on the deal and a mood of uncertainty. You may also face pitfalls following a deal such as: the target business does not do as well as expected. the costs you expected to save do not materialise.

What is Rule 7 of the Takeover Code? ›

Rule 7—Setting the scene

Rule 7.1 deals with the requirement for an immediate announcement if the offer is amended. Rule 7.2 deals with the time from which a fund manager or principal traders connected with an offeror or offeree will be treated as acting in concert with the offeror or offeree.

What is Rule 5 of the Takeover Code? ›

An offeror should not invoke any condition … so as to cause the offer not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the condition … are of material significance to the offeror in the context of the offer.”.

What is Rule 9 of Takeover Code? ›

Rule 9 requires a person, or persons acting in concert, to make an offer for a company where it or they have acquired 'control' of the company. The Code defines 'control' as an interest or interests in shares carrying in aggregate 30% or more of the voting rights of a company.

What is a 100% acquisition? ›

100% Acquisition Proposal means any Acquisition Proposal, whether payable in cash, securities or a combination thereof, by any Person or Group to acquire Beneficial Ownership of 100% of the equity securities (including those issuable pursuant to Convertible Rights) of the Company that are not already Beneficially Owned ...

What is acquisition limit? ›

Acquisition Cost Limit means Authority limits on the maximum purchase price of a home, by area.

What are stock acquisition rights? ›

Stock Acquisition Right means any option, warrant, right (preemptive or otherwise), call, commitment, conversion right, right of exchange, plan or other agreement or contract of any character providing for the purchase, issuance or sale of any securities of any Company.

What rights does a 5% shareholder have? ›

5% – Convening General Meetings: 5% shareholders have the power to call a general (shareholder) meeting of the company, and table one or more resolutions of their choosing. The directors are obliged to set a date for the general meeting within 21 days, and hold the meeting within a further 28 days.

Does a 50% shareholder have control? ›

Shareholder control

But in a limited company, having 50% of the shares actually means you have no control at all and neither does the holder of the other 50% of the shares.

What is the 10 percent ownership rule? ›

A principal shareholder is a person or entity that owns 10% or more of a company's voting shares. Principal shareholders have significant influence over a company, allowing them to vote on appointing the (CEO) and board of directors.

What usually happens after an acquisition? ›

Immediately Following Acquisition

The buyer should dig into the company's books and make some serious decisions about how to move forward. During this quiet period, it's important for the leadership team to keep the lines of communication open with employees, who will likely be nervous.

What happens to shareholders when two companies merge? ›

How does a merger affect share price? Mergers can affect the share price of both companies. The smaller company's shares are likely to rise in value and shares in the larger company may dip. However, it is common for the shares in the newly formed company to be higher in value than those of the two original businesses.

Do shareholders get paid in acquisition? ›

If you own shares directly, you'll generally receive the same amount that was paid for your stock by the acquiring company. If you own through an investment firm, you'll get a payout on top of whatever was paid for your shares by the acquiring company.

Are acquisitions good for shareholders? ›

Key Takeaways

The target company's short-term share price tends to rise because the shareholders only agree to the deal if the purchase price exceeds their company's current value. Over the long haul, an acquisition tends to boost the acquiring company's share price.

What percentage of acquisitions are successful? ›

According to most studies, between 70 and 90 percent of acquisitions fail. Most explanations for this depressing number emphasize problems with integrating the two parties involved.

What two things must occur for acquisition to work? ›

In order for acquisition to occur, the neutral stimulus and naturally occurring stimulus must be paired together multiple times in most cases. Once the response has been acquired, continuing to pair them can help strengthen the response.

What is needed for a successful acquisition? ›

Here are seven elements that help create the synergy needed for a successful acquisition:
  • Early Preparation. ...
  • Cultural Alignment. ...
  • Communication Strategy. ...
  • Adequate Leadership And Resources. ...
  • Post-Acquisition Integration Team. ...
  • Integration Action Plan. ...
  • Leadership Team Evaluation.
Feb 13, 2020

What documents are required for acquisition? ›

After that, I'll also very briefly introduce you to several other common mergers and acquisitions (M&A) transaction documents, including:
  • Confidentiality Agreements.
  • Letters of Intent.
  • Exclusivity Agreements.
  • Disclosure Schedules.
  • HSR Filings.
  • Third Party Consents.
  • Legal Opinions.
  • Stock Certificates.

What is the first step in the acquisition process? ›

The acquisition process starts with the determination of the need. Planning the acquisition includes preparation of documentation to support the determined need, and all required approvals. Market research is conducted. Acquisition method is determined.

What is the first process of acquisition? ›

Step 1. Research Target Companies. The acquisition process can cover many months and involve a multitude of steps, so the acquirer needs to have a firm sense of what it wants to get out of each transaction, as well as a detailed checklist for doing so.

What happens during the acquisition process? ›

The merger and acquisition process includes all the steps involved in merging or acquiring a company, from start to finish. This includes all planning, research, due diligence, closing, and implementation activities, which we will discuss in depth in this article.

What are the acquisition method? ›

The acquisition method is a way of accounting for the purchase of assets. When an organization acquires assets, it must record them as financial statements. This would be at their fair market value. This means that all intangibles and fixed, tangible assets are recorded on the balance sheet.

What does acquisition process mean? ›

Acquisition Process means the process of identifying properties to be acquired, negotiating the terms and conditions of purchase of such property, preparing capital budgets, preparing feasibility studies, reviewing leases, plans, specifications, schematic designs, and other similar documents, preparing and submitting ...

What rights does a 75% shareholder have? ›

Rights of shareholders holding more than 75% of shares

A special resolution is one passed by at least 75% of the shareholders present in person or by proxy and entitled to vote at a general meeting.

What is the 20 percent rule stocks? ›

In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.

How do you calculate takeover? ›

We can also calculate the takeover premium by estimating the company's enterprise value. Enterprise value Formula = Market Capitalization + Preferred stock + Outstanding Debt + Minority Interest – Cash & Cash Equivalentsread more. The enterprise value reflects both equity and debt of the company.

What is the 50 rule in stocks? ›

The fifty percent principle is a rule of thumb that anticipates the size of a technical correction. The fifty percent principle states that when a stock or other asset begins to fall after a period of rapid gains, it will lose at least 50% of its most recent gains before the price begins advancing again.

What are the 3 main ownership rights of a shareholder? ›

Key Takeaways

Common shareholders are granted six rights: voting power, ownership, the right to transfer ownership, dividends, the right to inspect corporate documents, and the right to sue for wrongful acts.

Can I be forced to sell my shares in a company? ›

Yes. Most companies that raise investment (on Crowdcube or elsewhere) include a “drag along” procedure in their articles of association. The procedure is designed to ensure that minority shareholders cannot block an exit by the majority.

What is the 15 50 stock rule? ›

The 15/50 Stock Rule stands for the premise that if you believe you have more than 15 years left on this planet, your portfolio should consist of at least 50% stocks, with the remaining balance in various bonds and cash. It's a surefire way to strike a balance between risk and reward.

What is the 8 week hold rule? ›

If your stock gains over 20% from the ideal buy point within 3 weeks of a proper breakout, hold it for at least 8 weeks.

What is the 3% rule in stocks? ›

Edwards' "Technical Analysis of Stock Trends," said we should use a 3% rule. That means that the line needs to break by 3% to believe the break is real. Since 3% in this current market is approximately 100 points give or take, call it a range down to 3600-ish.

How do you calculate how many shares you are buying? ›

Divide the amount of money you have available to invest in the stock by its current share price. If your broker allows you to buy fractional shares, the result is the number of shares you can buy. If you can buy only full shares (most common), round down to the nearest whole number.

How is cost of acquisition calculated? ›

How is cost per acquisition calculated? To calculate cost per acquisition, simply take the entire cost of marketing over a given period of time and divide it by the total number of new customers in that same time period.

What is a typical acquisition premium? ›

The premium in a merger or acquisition is defined as the difference between the offer price and the market price of the target before the announcement of the transaction. A substantial body of evidence indicates that M&A premiums average 20 to 30 percent above a target's preacquisition share price.

What is the 2% rule? ›

The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

What is the Penny stock Rule? ›

In the past, penny stocks were considered any stocks that traded for less than one dollar per share. The U.S. Securities and Exchange Commission (SEC) has modified the definition to include all shares trading below five dollars.

What is the 10 am rule in stocks? ›

9:30–9:40 a.m. Stocks that open higher or lower than they closed typically continue rising or falling for the first five to 10 minutes… 9:40–10:00 a.m. … before reversing course for the next 20 minutes—unless the overnight news was especially significant.


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