What is a primary disadvantage of external growth for a business?

Choosing external growth, such as mergers or acquisitions, often involves significant financial investment, which is a primary disadvantage for businesses. This process can be costly in various ways; there are expenses associated with the acquisition itself, such as purchase price, legal fees, and potential restructuring costs. Additionally, the integration of two companies can involve further expenditures, including rebranding, aligning operational systems, and consolidating resources.

These financial burdens can impact a company's cash flow, increase debt levels, and potentially strain its financial resources, making it a primary consideration when pursuing growth via external means. Businesses must ensure that the expected benefits of such growth outweigh these substantial costs to justify the decisions made.