How Do You Spell ACQUISITION PREMIUM?

Pronunciation: [ɐkwɪsˈɪʃən pɹˈiːmi͡əm] (IPA)

Acquisition premium is a term used in finance to refer to the amount paid above the fair market value for the acquisition of a company. The word "acquisition" is pronounced /ˌæk.wɪˈzɪʃ.ən/, and "premium" is pronounced /ˈpriː.miəm/. The spelling of "acquisition" follows the typical English spelling conventions, while "premium" is spelled with the letter "i" to represent the long "e" sound, followed by the letter "u" to represent the "m" sound. The combination of these two words creates a distinct term that describes a specific aspect of corporate transactions.

ACQUISITION PREMIUM Meaning and Definition

1. Acquisition premium refers to the additional amount paid by an acquiring company over the fair market value of the net assets of the target company during a merger or acquisition. It represents the difference between the price paid and the intrinsic value of the assets acquired.

   When a company acquires another entity, it aims to gain control and benefit from synergies and strategic advantages that may arise from the combination of the two companies. The acquisition premium is the value attached to these benefits, which may include increased market share, access to new markets or technologies, economies of scale, or enhanced competitiveness.

   The acquisition premium is calculated by comparing the acquisition price with the fair value of the target company's net assets, excluding any intangible assets. It is usually expressed as a percentage or a dollar amount. The premium can vary significantly depending on various factors such as the industry, the competitive landscape, the growth potential, and the specific circumstances surrounding the acquisition.

   Acquiring companies may be willing to pay a premium to secure a strategic advantage, eliminate a competitor, or gain market share more quickly. However, it is essential for the acquirer to carefully evaluate the potential benefits and risks associated with paying an acquisition premium, as it can impact the financial performance and shareholder value of the acquiring company in the short and long term.

Etymology of ACQUISITION PREMIUM

The etymology of the word "acquisition" can be traced back to the Latin word "acquisitio", which means "acquisition, gaining, obtaining". It is derived from the verb "acquirere", meaning "to get, obtain, procure".

The word "premium" comes from the Latin word "praemium", which originally meant "reward, recompense, bonus". It is derived from the Latin verb "praemere", which means "to buy in advance, secure by payment".

When combined, "acquisition premium" refers to the additional cost or value paid by a company in an acquisition or takeover of another company. The term highlights the extra amount above the base price that is often paid to acquire a company due to factors like potential strategic value, synergies, brand recognition, or other assets.