Chapter 7: Size Of Business

Question 1

Define external growth

Answer 1

External growth: business expansion achieved by means of merging with or taking over another business, from either the same or a different industry.

Question 2

Define merger

Answer 2

Merger: an agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly merged business.

Question 3

Define takeover

Answer 3

Takeover: when a company buys more than 50% of the shares of another company and becomes the controlling owner of it – often referred to as ‘acquisition’.

Question 4

Define synergy

Answer 4

Synergy: literally means that ‘the whole is greater than the sum of parts’, so in integration it is often assumed that the new, larger business will be more successful than the two, formerly separate, businesses were.