External Growth

Question 1

Merger

Answer 1

This is where 2 companies join together to form a new larger business

Question 2

Acquisition / takeover

Answer 2

This is where control of another company is achieved by buying majority of its shares

Question 3

What are the benefits of external growth

Answer 3

Increase of market shares
New management and workers with new skills and talents
Maybe able to meet customer needs more efficiently with new recourses
Economies of scale

Question 4

Synergy

Answer 4

The concept that combined valve and preformance of 2 companies combined will be greater that the sum separate individual parts

Question 5

Disadvantages of external growth

Answer 5

Diseconomies of scale ( business and shareholders)
May take on extra debt (business and shareholders)
Can result in redundancy (employees)
Higher prices for the (coustomers)
Can lead to higher prices (suppliers)