IPO stands for Initial Public Offering and refers to a company floating its stock on the market for the first time, while acquisition is when an existing company tries to buy another that does not have any business connection to it.
An initial public offering (IPO) is the first sale of stock by a company to the public. This is often used when a privately held company looks for growth and capital to expand rapidly. An IPO is similar to an acquisition, but some key differences separate them.
Who pays for it?
An acquisition is when one company purchases another. There can be significant benefits in acquiring other companies because you often get access to new technology and expertise, but this typically does come at a high cost.
One of the main differences between acquisition and IPOs is who pays for it; during an acquisition, it will typically be paid for by cash or debit; however, during an IPO, it will always be paid for by equity. Another difference is that an acquisition can be made public, but an IPO cannot.
How long does it take?
An initial public offering (IPO) is when a private company goes public for the first time by selling stock to investors to raise capital. On the other hand, an acquisition typically costs cash or debit and results when one company purchases another.
There are some differences between these two processes, such as how much time it takes for each process to complete and who pays for each process. When looking at IPOs vs acquisitions, there are various pros and cons of both processes, which will depend on your business situation.
The difference between IPO and acquisition in Hong Kong
The difference between IPO and acquisition in Hong Kong is that foreign companies may do both, but only initial public offering is allowed by local companies.
An example of an acquisition in Hong Kong would be when a US firm tries to purchase a well-established restaurant chain because this does not affect the economy. In contrast, if someone wanted to use IPO, they would need approval from the Hong Kong Monetary Authority (HKMA) because it involves raising capital which affects the economy.
Another difference between IPO and acquisition is that both cause an increase in liquidity. Still, there is a risk of volatility for the former, while the latter results in increased financial stability.
If you want to float your business on the market, then an IPO would be required, but an acquisition will suffice if you want to purchase another company without any relation. The main difference between IPO and acquisition is that only foreign companies can use the former, while local ones can opt for the latter.
Risks of IPOs
There are many different types of risks related to going public, but two primary ones stand out as the most concerning – dilution and increased competition. In an acquisition or merger, these risks increase even more rapidly since there may be long-term effects that aren’t seen immediately after the transaction has been completed. In some cases, the risks of going public may outweigh the benefits.
Risks of acquisitions
Several risks may be associated with this action. For example, suppose the company purchasing the other makes a mistake or miscalculation in their purchase price or bonus structure for the employees of their new asset.
In that case, it could lead to many problems, including litigation which will likely damage both companies involved as potential loss of shareholder equity.
There are also reputational risks associated with mergers and acquisitions because one poorly executed deal will put into question whether or not they can handle future deals successfully. An even more significant risk that may cause an acquisition attempt to fail is a social risk.
Suppose shareholders believe that management is not acting in the best interests of the shareholders or is concerned about management’s treatment of employees after an acquisition. In that case, they could vote against future attempts at acquisitions.