An acquisition vehicle is a dedicated entity used to carry out the purchase of a company. These vehicles simplify the transaction, provide ownership clarity, and support financing or restructuring needs. This guide breaks down the meaning and purpose of acquisition vehicles, with practical examples of how they are used in real transactions.
Acquisition Vehicle – meaning and definition
An acquisition vehicle is a company or entity formed for the purpose of acquiring another business. Instead of purchasing the target company directly, buyers set up a new company that becomes the legal entity completing the purchase.
This structure is often used in mergers and acquisitions because it keeps the transaction separate from the buyer’s existing operations, giving the process its own legal and organisational framework. It also provides a clear basis for ownership, making it easier to define who holds what stake in the deal.
In addition, using an acquisition vehicle can simplify financing, since loans or investor contributions can be directed into a single, dedicated entity. It also helps manage tax and regulatory considerations by keeping the transaction within a clearly defined corporate structure.
In simple terms, an acquisition vehicle is the company that buys the company.
Why Businesses Use Acquisition Vehicles
Businesses and investors use acquisition vehicles for several reasons:
Risk separation
The acquisition is isolated within a dedicated entity, protecting other group companies from liabilities.
Clean ownership structure
Shareholders, investors, or partners can hold their ownership stakes directly in the acquisition vehicle.
Financing flexibility
Loans, equity contributions, or co-investments are easier to administer when placed in a dedicated entity.
Administrative simplicity
Corporate actions such as issuing shares or documenting decisions are easier when the transaction has its own structure.
Common Types of Acquisition Vehicles
BidCo
A company formed by a buyer (often private equity) to make the acquisition bid and complete the purchase.
HoldCo
A company created to hold long-term ownership of the target company or a group of businesses.
NewCo
A newly incorporated entity used before or during restructuring to facilitate ownership changes.
Each type serves the same core role — acting as the legal entity through which the acquisition is executed.
How an Acquisition Vehicle Fits Into a Company Acquisition
In a typical purchase, the acquisition vehicle sits between the buyer and the company being acquired. The buyer funds the vehicle through equity, loans or external financing. The vehicle then uses those funds to buy the target company’s shares. Once the transaction is completed, the target becomes a subsidiary of the acquisition vehicle, which can then be integrated into the wider group structure or remain as a dedicated holding entity.
In many deals, the SPV continues to hold the acquired company after completion, acting as a simple, well-defined ownership layer that supports later decisions such as reporting, refinancing or divestments.
Advantages and Limitations of Acquisition Vehicles
Acquisition vehicles offer several benefits: they help separate risks, simplify financing arrangements and provide a clean legal and governance structure around the transaction. Their clarity makes it easier for investors, lenders and advisors to understand the deal and track obligations.
However, they also require proper administration and compliance with corporate rules in the jurisdiction where they are created. This adds an additional layer of documentation and oversight, which needs to be managed throughout the vehicle’s lifecycle.
