Procurement vs Acquisition — Key Differences

Key Differences

1. Scope and Purpose

Procurement:  For the purposes of meeting particular needs or requirements, procurement is a wider process that involves the acquisition of goods, services, and work from outside sources. It may include, for instance, procurement of office supplies and equipment as well as the selection of contractors to carry out construction works.

Acquisition: By contrast, the acquisition process is a more focused one that has an explicit focus on attaining ownership or control of undertakings, organizations, and specific assets. Purchasing its shares, and assets, or merging with it, it involves one entity, the acquirer, taking over another entity, the target.

2. Entities involved

Procurement: The buyer, often a company, a government agency, or an organization, and the supplier, often an external vendor or contractor, are involved in the procurement process.

Acquisition: In acquisition, there are also two main parties—the acquirer (the company or entity seeking to gain control) and the target (the company or assets being acquired).

3. Process

Procurement: A number of steps are involved in the procurement process, such as identification of the need for goods or services, selection of potential suppliers, negotiation of contracts, and management of delivery.

Acquisition: A number of steps are required for the acquisition to take place, which include identification of possible targets, thorough investigations, negotiations on terms, and integration of acquired assets or companies into an acquiring organization.

4. Legal and Regulatory Considerations

Procurement:  The procurement process may involve adherence to various procurement regulations and guidelines, especially when it comes to government agencies or organizations working with public funds.

Acquisition: Acquisition deals are subject to more extensive legal and regulatory considerations, including antitrust laws, due diligence processes, and shareholder approvals in the case of corporate acquisitions.

5. Industry and Application

Procurement: Procurement plays a common business role in the various industries and sectors which need goods or services to support their activities.

Acquisition: In the case of mergers and acquisitions, where undertakings are seeking to improve their market share, broaden their portfolios or obtain a competitive advantage, the acquisition is generally linked with corporate finance as well as Mergers and Acquisition.

Benefitsof Procurement

1. Cost Savings

Procurement provides the opportunity for organizations to receive goods or services at reduced costs, which can lead to substantial cost savings over time.

2. Quality

Procurement enables organizations to procure products and services that comply with their quality standards, which are capable of improving product or service quality as a whole.

3. Flexibility and adaptability

Procurement allows organizations to buy goods and services from a number of suppliers with the aim of adapting to changing market conditions.

Benefitsof Acquisition

1. Synergies

The acquisition enables organizations to benefit from the synergies by integrating acquired assets or companies into their existing activities.

2. Market Expansion

The acquisition provides a fast opportunity for the acquiring company to expand its market position. The acquirer may benefit from a larger customer base and gain more market shares through acquisitions of companies or assets in new geographical areas or entry into new markets.

3. Access to New Technology and Intellectual Property

A company that acquires a business is often accorded access to valuable Intellectual Property, Patents andProprietary Technology of the target enterprise. This would increase the acquirer’s capacity to act and speed up research and development efforts while improving its competitiveness.