Understanding inorganic company growth
Inorganic company growth is growth through acquisitions or mergers with other firms. Rather than growing internally by gradually building internal resources and the customer base (organic growth), the company seeks to grow through acquiring another firm.
Why firms opt for inorganic growth
While growth through acquisitions does not come without its own set of problems, there are some benefits associated with acquiring another firm. Some advantages of inorganic growth include;
It can be a lot quicker to grow through acquisition than to grow organically. It allows a step change in resources or sudden growth in customer base. What may take months or years to achieve internally may be achieved overnight through an acquisition.
Access to resources that are difficult to develop internally
Acquisitions also allow companies to obtain resources that would be difficult to develop internally. It can be difficult to build resources in an area that you have no prior experience. Acquiring a company that already has experience in that area allows you to more easily achieve access to resources that may be challenging to otherwise acquire.
Brings a reputation in the new area
Moving into a new area through acquisition also has the benefit that it brings some degree of credibility in the new area. Gaining initial customers in a setting that the firm does not have prior experience in can be difficult. Even if the company can develop the underlying resources, acquiring a company for the brand or reputation may allow access to the new customer base in a way that the company may not be able to otherwise achieve.