No, it's not the $600 you paid for those red-bottom Louboutins. Instead, acquisition cost refers to the book value a company recognizes for property, plant, and equipment it has purchased, subtracting other benefits it got when making the purchase, like state tax waivers, "cheap money loans," and free coffee.
So that's acquisition cost as it applies to one business buying stuff meaningful enough to be tracked on the balance sheet. Acquisition cost can also refer to the cost of acquiring a customer. At Shmoop, we don't spend money on marketing, so we have zero costs, other than our own blood, sweat, and tears...mainly tears, in acquiring a customer. But match.com spends a fortune advertising everywhere, and they can do fancypants math, such that in a given year, if they spend $80 million dollars on marketing and get a million new customers, than each new customer costs them, give or take, $80.
The question then revolves around whether that acquisition cost was well spent, i.e., did the customer hang around paying $25 a month or more for at least four months, or did they only sign up for one month and then go away? And/or did they sign up for one month, go away, and then come back six months later after the divorce for a year?
Like the onerous task of finding the proper spouse, identifying whether or not acquisition costs were well spent or not is a moving target.
Related or Semi-related Video
Finance: What's the difference between m...22 Views
Finance allah shmoop what's the difference between mergers and acquisitions
all right people listen up Merger that's what's about to
happen here it's a merger acquisition that's what's about to
happen here Corporate america is kind of same thing when
two companies merge while they generally you know attracted to
each other hopefully respect each other they share stock or
combined the stocks of each side and you know combine
efforts and then and then cuddle afterwards if they're successful
at the merger than the combination of two roughly equals
yields more than the one plus one combo that made
them so two companies get together on generally equal ish
footing In that case acquisitions are a combining more like
that eating thing on much different footing The large company
eats or buys the target either using its more highly
valued stock currency or it's taft to do so Well
why would a company acquire another Well the target might
have one hundred employees ninety of whom can be fired
with massive expense savings after the acquisition For the acquirer
such that economically the acquisition won't just makes a whole
lot of financial sense acquisitions happen for market power reasons
As well like imagine the negotiating leverage that amazon would
have if it bought the next five biggest online retailers
Or maybe it'll just kill them Probably not legal for
them to buy him anyway given the monopoly like dominance
of amazon these days But wow that would be a
powerful set of acquisitions And that would be a good
reason for ems on to acquire a whole bunch Things
and bezos would grow even more powerful maybe too powerful
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