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IAI Actuarial Core Principles · Business Finance · Corporate growth, restructuring and divestment

Which of the following is a recognised advantage of growing through acquisition rather than organically?

Acquisition's main advantage is speed: the buyer immediately gains an established market position, customers and capabilities. The other options describe features of organic growth or are actually disadvantages of acquisition, such as overpayment risk, integration problems and heavy financing needs.

  1. AImmediate access to an established market share, customers and capabilitiesCorrect
  2. BLower risk of overpaying for the target's assets
  3. CEasier cultural integration of staff
  4. DSlower but more controllable pace of expansion
  5. No need to raise external finance

Explanation

Acquisition gives speed and instant access to existing markets, products and skills. Overpayment risk, cultural clash and financing needs are typically greater for acquisitions than for organic growth, and the pace is faster, not slower.

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