Most Popular Expansion Methods for Privately-Held Companies

HORIZONTAL GROWTH

When a company chooses Horizontal Integration, it acquires infrastructures, assets and companies within the same industry. This results in an expansion of existing operations, rather than the establishment of new operations. An example of horizontal integration would be an overseas commercial upholstery manufacturer buying a similar US-based company in order to procure new distribution channels. Or a fitness gym with multiple locations buying smaller gyms in strategic geographic markets in order to grow their brand and membership numbers.

VERTICAL GROWTH

Vertical growth of a company is the act of expanding into new operations for the purpose of decreasing the company’s dependence on other firms that provides services to the company’s operations. For example, a transportation company specializing in relocation and moving services that typically pays another firm to store and warehouse their customer’s goods, may choose to vertically expand through acquisition of a warehouse facility.

Vertical integration allows a company to internally realize value that would otherwise be an expense paid to another firm. By learning distinct differences, and the opportunities provided within these two business growth strategies, a forward-thinking, aggressively-positioned, privately-held company can capitalize on new and heightened successes.

If you're thinking about expanding your business operations, contact us to discuss strategy and available opportunities.

Margot Murphy is the Principal Broker of Sage Advisory Group, a California Business Brokerage firm which acts as a marketing engine, sale facilitator and sell-side representative for business owners and corporations seeking to transfer sale of companies generating $2MM - $15MM annual revenue.

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