Which term describes the process when one company purchases another company?

The correct term for the process when one company purchases another company is acquisition. An acquisition occurs when a larger company takes over a smaller company or when a company buys a substantial portion of another corporation's shares to gain control. This action can lead to synergies in operations, increased market share, and enhanced profitability for the acquiring company.

In the context of business operations, distinguishing an acquisition from a merger is crucial. A merger typically refers to two companies coming together to form a new, combined entity, often perceived as a partnership rather than a takeover. This distinction highlights that in an acquisition, one company fully absorbs another rather than combining their interests equally.

Understanding the other terms can provide additional clarity. A joint venture refers to a business arrangement where two or more parties agree to pool their resources for a specific project while remaining separate entities. A franchise is a method of distributing goods and services where a franchisor grants a franchisee the rights to operate using its trademark or business model for a fee. Neither of these terms accurately represents the ownership transfer inherent in an acquisition.