Merger And Acquisition Case Study

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According to Growing a company by international acquisition (n.d.) there are two major ways of growing a business: organic or inorganic. The decision which one is the best solution for a given company depends on the market, trends and the resources of the company. In most cases organic growth is constant and an ongoing process while the inorganic growth happens when the company decides to widen its options.

Organic growth happens when a company is using its own resources, opportunities and advantages to improve profitability. Usually this happens by one or more combined:

- Expanding sales (inbound, outbound) activities to reach more customers

- New product launch to increase market share

- Marketing activities
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This kind of expansion would be organic growth.

Inorganic growth happens when a company management decides to merge or acquire a company. The difference between merge and takeover is substantial. Takeover means the company would buy 51% of the shares and would become the legal owner of the acquired company. Merger is more a mutual agreement to share resources and knowledge to increase profit of all parties.

Acquiring a company can be vertical or horizontal. Horizontal means a company will acquire another company with similar or the same services or goods. This has several advantages: less competition on the market and there is an existing supply and sales channel ready for takeover. Vertical takeover is when a company acquire organization which will help to gain market advantage. For example Davis Service Group may acquire a textile producer company and gain significant advantage by offering not just cleaning service but repair shop and “switch old for new” as well…

Businesses grow when they have the resources to expand and opportunities exist for growth. Explain how the acquisition of Berendsen provided such a good opportunity for the Davis Service
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The economical standard in each EU member varies but generally they all represent a solid market opportunity. Horizontal - inorganic growth of Davis Services Group in EU is logical because they were expanding their business in a foreign market. They have found a perfect candidate, a market leader in the same industry – Berendsen. This is the main reason why they decided to follow horizontal growth. However there are certain facts that point to organic growth as a more logical one. For example since EU is consisted of 27 different countries it is much more efficient to start as a greenfield venture in one particular country and slowly expand. In that way the risk of default would decrease and company would get time to learn how to do business in new territory. Organic growth is also advisable if Davis want to keep its company culture

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