Inorganic Growth

Instead of building new products or winning customers one by one, a company can grow quickly by acquiring another business that already has customers, products, staff and revenue.

For example, a company with revenue of 200 million that buys a competitor with revenue of 50 million immediately increases its revenue by 25%, even if its own business did not grow at all.

Inorganic growth can bring speed, access to new markets or technologies, and cost savings from combining operations. It can also remove a competitor or fill gaps in a product range.

It carries risks. Acquisitions are often expensive, and buyers frequently pay a large premium over the target's market value. Integrating two businesses, with different systems and cultures, can be difficult. If the expected benefits do not appear, the buyer may later need to write down the value of the acquisition. This is why investors look at organic growth separately to judge how the underlying business is really doing.