• To understand the following different methods of external growth> Mergers & Acquisitions & Takeovers> Joint Ventures> Strategic Alliances> Franchising

Learning Outcomes

Methods of Growth

2

Methods of growth

Internal External

Merger Takeover Acquisition

When a business buys part of another business

When a business buys a smaller business

Joining together of two similarly sized businesses

When a firm grows without involving other businesses

Where two businesses join to form another business

Growth and expansion

External growth - integration

3

Growth

• Internal expanding original operations (existing ) sales

• External operations involving a takeover or merger.

External growth (Integration)

5A hostile takeover occurs when the acquired company has no wish to integrate with the ‘aggressor’

Horizontal Lateral

VerticalForwards

Vertical Backwards

External growth (Integration)

• Horizontal: Two businesses which make similar products at the same stage of the chain of production join together

• Lateral: A business buys a related business at the same level of production

• Forward vertical: A business buys another business which is further forward in the chain of production

• Backward vertical integration: A business buys another business which is further back in the chain of production

• Conglomerate merger: Where two businesses with no common interests merge to form a single company

6

Research TaskFind real life examples of each method (google doc)

• Use the Internet to investigate a recent takeover or merger– The BBC Business website is a good

place to start a search• Questions

– Why did the two parties integrate?– What are the expected gains?– What about losses? Who might lose

out from the merger?– Do you think the merger would be a

good thing?