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Organic Growth

 

An organic growth is a growth of the company when inner resources are used to get larger market share. Also organic growth may be achieved together with growth of the whole market segment or entering new markets organically. The main thing that organic growth does not include is growth through acquisitions or mergers (M&A). 

 

Neither organic growth neither M&A growth has critical advantage. It all depends on capital invested for growth and return on investment. The main difference is that growth through M&A cost cash instantly and provides fast growth or enters in to new markets, when organically it could take many years. But organic growth is more natural and most of the time costs less, and that’s why organic growth is more valued by investors. 

 

If company grows very fast it doesn’t mean that it has any organic growth in it. Such company may consistently issue new shares (raise capital) and consistently acquire other smaller firms, and from first look it may seem that company is growing at very successful rate, but it would not mean that management does everything for stockholder wealth maximization

 

 






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