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

Which of the following is generally an advantage of inorganic growth through acquisition compared with organic growth?

The main advantage of acquisition over organic growth is speed: the acquirer gains an established customer base, products and market position immediately, rather than building them slowly. The other options describe typical drawbacks of acquisitions, such as overpayment, integration issues and heavy financing.

  1. AFaster entry into a new market with an established customer baseCorrect
  2. BLower risk of overpaying for the growth obtained
  3. CEasier cultural integration of the workforce
  4. DSmaller need for external financing
  5. Greater control over the pace of expansion without any due diligence

Explanation

Acquisition gives immediate market presence, customers, brands and capabilities, so growth is quicker. Overpayment risk, integration difficulty and larger financing needs are disadvantages of acquisition, not advantages. Due diligence is essential in acquisitions.

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