Most companies today strive to create value for their owners and other constituencies. Growth is a vital aspect of value creation.
Though, the concept is simple: If current profitability exists, then expanding the scale of the enterprise should create growth in profitability — the primary driver for increasing company value. Although secular growth is always pursued, many business strategies assume that value can be created more quickly through acquisitions. Investment is required for any type of growth, but the acquisition of an entire company can satisfy several of the strategic growth objectives at once: geographic expansion; customer acquisition; product offering expansion; competency; and accelerated new product development. Also, costs can be reduced by eliminating redundancies in assets, labor and fixed expenses, as well as developing more efficient “go to market” tactics. In a nutshell, that is the compelling argument for growth by acquisition.