Andreas Savva 6A
Discuss whether a business is likely to benefit from organic growth than from growth achieved through a
merger or takeover
Organic growth is when a firm increases its size through investment in capital equipment or an
increased labour force. While a merger is when two or more companies merge under common
ownership. A takeover implies that one firm wishes that one firm wishes to buy another. It is
controversial whether a firm will benefit more from organic growth rather than growing through
mergers and takeovers.
On the one hand, it can be said that organic growth is more beneficial than using mergers and
takeovers to grow. Firstly, a piece of evidence that supports this stance is the idea that organic growth
happens over a more sensible pace. Growing organically happens over a period of time, allowing the
firm to organise themselves in order to maintain efficiency and not make a decision that could
disadvantage them. While mergers and takeovers happen in a much more limited time period. This
means that they may result in a business over-expanding and incurring high-fixed costs and the firm may
experience greater financial problems, especially if there an economic slump. This illustrates how
organic growth is more advantageous for a firm than mergers and takeovers. Secondly, organic growth
may be cheaper. Since organic growth happens slowly, expanding your firm’s workforce, opening open
more locations or taking any other action that would lead to organic growth happens over a longer
period of time, meaning that the firm will not incur large costs all at once and will be able to quickly
recoup from these costs as they are not a huge burden on them. In contrast to organic growth, firm
acquisitions that would lead to mergers and takeover may be expensive and it could take a long time to
recoup the costs. This could be worsened if there is economic turmoil. Hence, this highlights how
organic growth is more beneficial for a firm that external growth. A third point that shows how organic
growth is superior is how there are lower risks associated with organic growth. By growing organically, a
firm is not dangerously expanding but making slow additions and changes to aspects like its workforce,
reducing the risks it could face. While, a merger or takeover can make a firm enter an unfamiliar market.
They are more likely to make a bad decision in the market they have no knowledge of, increasing the
risks they could face. In turn, since there are more risks, the firm is more likely to face diseconomies of
scale, where their average costs increase, emphasising how organic growth is more beneficial.
Therefore, it is indeed true to say that organic growth is more likely to benefit a business rather than
external growth.
On the other hand, there is evidence that shows how organic growth also has disadvantages. An initial
disadvantage of organic growth is that the pace at which organic growth happens might be too slow.
The nature of organic growth implies that in order for a firm to grow organically, a long period of time
must pass for this to be achieved. Shareholders may prefer more rapid growth in order to enjoy a rise in
their dividends without having to wait which could discourage interested investors of buying shares and
becoming shareholders. Unlike organic growth, external growth in the form of mergers and takeovers
happens quickly. This showcases how organic growth is not as beneficial and external growth is more
advantageous. Another drawback of organic growth is that the growth of the firm depends on the
market. For the firm to grow organically,
there also needs to be a growth in the
overall market and industry that the firm
Discuss whether a business is likely to benefit from organic growth than from growth achieved through a
merger or takeover
Organic growth is when a firm increases its size through investment in capital equipment or an
increased labour force. While a merger is when two or more companies merge under common
ownership. A takeover implies that one firm wishes that one firm wishes to buy another. It is
controversial whether a firm will benefit more from organic growth rather than growing through
mergers and takeovers.
On the one hand, it can be said that organic growth is more beneficial than using mergers and
takeovers to grow. Firstly, a piece of evidence that supports this stance is the idea that organic growth
happens over a more sensible pace. Growing organically happens over a period of time, allowing the
firm to organise themselves in order to maintain efficiency and not make a decision that could
disadvantage them. While mergers and takeovers happen in a much more limited time period. This
means that they may result in a business over-expanding and incurring high-fixed costs and the firm may
experience greater financial problems, especially if there an economic slump. This illustrates how
organic growth is more advantageous for a firm than mergers and takeovers. Secondly, organic growth
may be cheaper. Since organic growth happens slowly, expanding your firm’s workforce, opening open
more locations or taking any other action that would lead to organic growth happens over a longer
period of time, meaning that the firm will not incur large costs all at once and will be able to quickly
recoup from these costs as they are not a huge burden on them. In contrast to organic growth, firm
acquisitions that would lead to mergers and takeover may be expensive and it could take a long time to
recoup the costs. This could be worsened if there is economic turmoil. Hence, this highlights how
organic growth is more beneficial for a firm that external growth. A third point that shows how organic
growth is superior is how there are lower risks associated with organic growth. By growing organically, a
firm is not dangerously expanding but making slow additions and changes to aspects like its workforce,
reducing the risks it could face. While, a merger or takeover can make a firm enter an unfamiliar market.
They are more likely to make a bad decision in the market they have no knowledge of, increasing the
risks they could face. In turn, since there are more risks, the firm is more likely to face diseconomies of
scale, where their average costs increase, emphasising how organic growth is more beneficial.
Therefore, it is indeed true to say that organic growth is more likely to benefit a business rather than
external growth.
On the other hand, there is evidence that shows how organic growth also has disadvantages. An initial
disadvantage of organic growth is that the pace at which organic growth happens might be too slow.
The nature of organic growth implies that in order for a firm to grow organically, a long period of time
must pass for this to be achieved. Shareholders may prefer more rapid growth in order to enjoy a rise in
their dividends without having to wait which could discourage interested investors of buying shares and
becoming shareholders. Unlike organic growth, external growth in the form of mergers and takeovers
happens quickly. This showcases how organic growth is not as beneficial and external growth is more
advantageous. Another drawback of organic growth is that the growth of the firm depends on the
market. For the firm to grow organically,
there also needs to be a growth in the
overall market and industry that the firm
