7 Inorganic growth Flashcards
Define inorganic growth
a business growth strategy that involves two or more businesses joining together to form one much larger one.
Define merger
occurs when two or more businesses join together and operate as one.
Define horizontal integration
the joining of businesses that are in exactly the same line of business.
Define synergies
the benefits that result from the combination of two or more businesses, like increased revenue, cost savings, or improved product offerings.
Define acquisition
the purchase of one company by another.
Define takeover
occurs when a company purchases another company.
Define vertical integration
the joining of two businesses at different stages of production.
Define forward integration
involves a merger or takeover with a firm further forward in the supply chain.
Define backward vertical integration
involves a merger/takeover with a firm further backwards in the supply chain.
Define conglomerate
a very larger single business organisation made of many different businesses, producing unrelated products.
Name financial risks of inorganic growth
- overpayment, may not be able to recoup the investment through increased revenue or cost savings.
- may take on debt to finance the merger, which can increase the financial risk and reduce flexibility.
- integrating two companies can be complex and costly (with potential disruptions to operations and loss of key personnel).
- mergers can result in clashes of company cultures leading to decreased productivity and loss of valuable employees.
- mergers may face opposition from regulators or other stakeholders, the merger may be blocked if they believe it will exploit customers or employees.
Define regulatory integration
control by the relevant authorities.
Define globalisation
where markets become so large that products could be sold anywhere in the world.
Define integration
joining together of two businesses as a result of a merger or takeover.
