stake investment & finance definition

An ownership interest that one company acquires in another that represents less than 100 percent ownership. A company takes a stake in another company in order to obtain the rights to a product or territory that will strategically help it. Companies are willing to sell stakes in themselves for a cash infusion or to partner with a larger competitor and thus improve their relative standing in the market. Often, stakes are popular ways to expand overseas and give both companies an opportunity to work together before considering whether a merger would be appropriate. However, just because a company takes a stake in another one doesn’t mean that a merger will be the next step.