Beachhead acquisition definition

A strategy for slow entering into new markets or industries through the purchase of a company.

Beachhead acquisition definition                                 

What is a beachhead acquisition?

A beachhead acquisition can be explained as an expansion to new markets through a takeover. This type of acquisition offers the possibility for a business to expand into another geographical location or industry. The entrance into a new market is performed by acquiring a company in a specific market.

Also, a beachhead acquisition can mean a hostile takeover. In this case, the acquirer is trying to purchase stocks from the open market without being noticed. The ultimate goal of the acquirer is to gradually buy as many shares as possible for the purpose of owning a majority of shares.

This type of acquisition is used when a business tries to gain a competitive advantage in a specific market. Businesses using this entrance try to capture a small market before moving on to bigger markets. The term has a military origin, where it signifies capturing a small line from enemy territory. Then, the line serves as the starting point for gradually advancing to the remaining territory.

Beachhead acquisition meaning

Before the initiation of this type of acquisition, companies should carefully examine whether the beachhead market has certain characteristics:

  • Availability of similar products (ensuring that the product will not be new in the market);

  • Demand for these products (ensuring that a demand is created and there is a potential for an increase in demand induced by product modifications);

  • Information about new products in the market are easily shareable and communicated between customers.

Beachhead acquisition explained

With this strategy, the acquirer examines the potential and acceptance of the products into a small part of the new market called the beached market. The beachhead market has features that make it a good starting point for selling the company's products and services. If the feedback is positive, the product will be gradually offered throughout the entire market. The acquirer is able to save on unnecessary costs if the product is not accepted by the market participants.

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