2. External Growth in Business

3. What is external growth?
A business doesn’t just have to grow internally by increasing profits… …it can also grow externally by joining forces with other businesses.

4. External growth: Mergers & Takeovers
External growth can take two forms…
A Merger
Two companies agreeing to join together to work with each other as a team.

5. 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.

6. 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.

7. Benefits of Merging Combined premises Combined products
Combined equipment
Combined staff

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

9. Advantages of Merging/Taking Over Another Business
Speed
Cheaper costs
Destroys the competition

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

11. 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.

12. However, Conglomerate Growth…
… is investing in a company completely unrelated to what you do. Such as a newspaper company investing in a clothing manufacturer.