http://www.business.govt.nz/tools-and-templates/educational-resources/external-growth-in-business Become familiar with external growth within a business in relation to the activities, methods, directs and benefits of external growth. Start by establishing the subject of mergers and takeovers by asking students if they know of any companies that have been merged or taken over and whether anything changed about the companies. Make a list of examples with the class. For a more intense learning game, divide the topic into four subjects (such as mergers, take overs, growth direction and external growth advantages). **References: - www.business.govt.nz/tools-and-templates/educational-resources/external-growth-in-business/External-Growth-in-Business_Handout.doc - www.business.govt.nz/tools-and-templates/educational-resources/external-growth-in-business/External-Growth-in-Business_Student-worksheet.doc - http://www.takeovers.govt.nz/ **Student Handout Growing a business isn’t just about building up staff and production, finding new markets and looking to increase profits internally. It can also include joining forces with other businesses in what is known as External Growth. This can, however, be carried out as part of an agreed Merger or a Takeover. MERGERS A merger – otherwise known as an amalgamation – sees a minimum of two companies agreeing to join together to work with each other as a team and share resources as one large company that will use: • Combined premises • Combined products • Combined equipment • Combined staff TAKEOVERS A takeover sees one company buying control of another to have complete power over the new, merged entity. Whereas amicable takeovers are welcomed by the company being bought, a hostile takeover is one that company management tries to block by persuading its shareholders not to sell. Takeovers provide growth in the following ways: • New premises • New products • New equipment • New staff ADVANTAGES OF MERGING WITH OR TAKING OVER ANOTHER BUSINESS Speed When speed is of the essence, a merger or acquisition can be the order of the day. This is because whatever assets you need, be they factories or staff, can be bought a lot quicker than they can be built. Cheaper Costs Why buy an asset such as a manufacturing plant when it would be cheaper to buy the majority of shares for the company itself? This often becomes an opportunity when a publicly held company’s poor performance cheapens the share price. Destroy Competition Taking over or merging with the competition can nullify a rival threat (boosting sales), create access to their brands and products, and increase the loyalty of customers to your own brand at the same time. DIRECTIONS OF EXTERNAL GROWTH Growth direction refers to the way the market relationship between businesses affects the investing company as it grows.

1. External Growth in Business

2. 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.
www.business.govt.nz

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

4. 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.
www.business.govt.nz

5. 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.
www.business.govt.nz

6. Benefits of Merging
• Combined premises
• Combined products
• Combined equipment
• Combined staff
www.business.govt.nz

7. Benefits of a Takeover
• New premises
• New products
• New equipment
• New staff
www.business.govt.nz

8. Advantages of Merging/Taking Over Another Business
• Speed
• Cheaper costs
• Destroys the
competition
www.business.govt.nz

9. Directions of External Growth
• Growth direction refers to the way the market
relationship between businesses affects the investing
company as it grows.
www.business.govt.nz

10. 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.
www.business.govt.nz

11. However, Conglomerate Growth…
… is investing in a
company completely
unrelated to what you
do.
Such as a newspaper
company investing in a
clothing manufacturer.
www.business.govt.nz

12. Find Out More
Facebook.com/business.govt.nz
Twitter.com/business_govtNZ
Linkedin.com/company/business-govt-nz
Slideshare.net/MED-Business
business.govt.nz