Strategic Buyout
What it is:
How it works/Example:
In many cases, the operating abilities of one company will complement those of an acquiring company in such a way that, if combined, the operational capacity of the two could generate substantially higher profits. The acquiring company will purchase the target company, even at an otherwise irrational price, provided that the acquiring company will increase profit potential.
Why it matters:
Strategic buyouts are as beneficial for the target company as for the acquiring party because both enjoy the higher profit realized from combined operations and economies of scale.