External Growth in Business

What is external growth?

A business doesnt just have to grow internally by increasing profits it can also grow externally by joining forces with other businesses.

External growth: Mergers & Takeovers

External growth can take two forms 1.A Merger Two companies agreeing to join together to work with each other as a team.

External Growth: Mergers & Takeovers

2. A Takeover One company buys a majority share in another company on the stock market to have complete power over the new, merged entity.

Takeovers Amicable vs. Hostile

While an amicable takeover is supported by the managers of the company being bought a hostile takeover is opposed by managers, who can try to persuade shareholders not to sell up.

Benefits of Merging
Combined Combined Combined Combined premises products equipment staff

Benefits of a Takeover
New New New New premises products equipment staff

Advantages of Merging/Taking Over Another Business

Speed Cheaper costs Destroys the competition

Directions of External Growth

Growth direction refers to the way the market relationship between businesses affects the investing company as it grows.

Directions of External Growth

Horizontal Growth is a business investing in a company just like itself. Vertical Growth is a business investing in a company not like itself, but in a related business.

However, Conglomerate Growth

is investing in a company completely unrelated to what you do. Such as a newspaper company investing in a clothing manufacturer.