MERGERS & ACQUISITIONS

Integration of companies Oil-wells Electricity generators Car dealers Gas (petrol) stations Subcontractors (component suppliers) Car makers Refineries Electricity distributors

Examples of different types of integration: oil wells refineries petrol stations component suppliers car makers car dealers car maker A + car maker B refineries + electricity generators

Different types of integration Vertical integration (supplier- company– customer) Horizontal integration (competitors) Conglomerate (comp. with no common business areas) Integration of core businesses or non-core business diversification (to diversify) Make or buy decision

How can companies get together? Sony Ericsson, a 50:50 joint venture of Sony Corporation and Ericsson AB, was established in October 2001.

How can companies get together? Daimler-Benz merged with Chrysler. (The Daimler-Chrysler merger)

How can companies get together? Ford took over Volvo Automotive Operations in 1999.

How can companies get together? Joint ventures Mergers Takeovers/acquisitions (friendly takeovers or hostile takeovers) * takeover, (n.), take over (v.) acquisition (n.), acquire (v.) merger (n.), merge (v.)

Fill in the missing words: merger, black knight, white knight, gray knight, takeover (acquisition), poison pill Basically, when two companies become one. This decision is usually mutual between both firms. A strategy used by corporations to discourage a hostile takeover by another company. The target company attempts to make its stock less attractive to the acquirer, e.g. by allowing existing shareholders (except the acquirer) to buy more shares at a discount or to buy to buy the acquirer's shares at a discount. A company that makes a friendly takeover offer to a target company that is being faced with a hostile takeover A second bidder in a corporate takeover which enters the scene in order to take advantage of any problems between the first bidder and the target company. The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. When one company purchases a majority interest in another company. A company that makes a hostile takeover offer.

Key:merger, black knight, white knight, gray (grey) knight, takeover (acquisition), poison pill Basically, when two companies become one. This decision is usually mutual between both firms. MERGER A strategy used by corporations to discourage a hostile takeover by another company. The target company attempts to make its stock less attractive to the acquirer, e.g. by allowing existing shareholders (except the acquirer) to buy more shares at a discount or to buy to buy the acquirer's shares at a discount. POISON PILL A company that makes a friendly takeover offer to a target company that is being faced with a hostile takeover WHITE KNIGHT A second bidder in a corporate takeover which enters the scene in order to take advantage of any problems between the first bidder and the target company. GRAY KNIGHT The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. MERGER When one company purchases a majority interest in another company. ACQUISITION A company that makes a hostile takeover offer. BLACK KNIGHT

Recent examples of M&A?

Merger or acquisition? The difference is not always so clear… ‘Fiat completed the full acquisition of, and merger with, Chrysler in 2014…’ ‘Facebook will now award 177.8 million shares of its Class A common stock and $4.59 billion in cash to WhatsApp’s shareholders,…, plus 45.9 million shares to WhatsApp’s employees to complete the deal.’

Speak about these companies ....

Use the words in bold to retell the story of Pliva Use the words in bold to retell the story of Pliva. Add the following: go for a friendly takeover /go for a hostile takeover make a friendly bid /make a hostile bid Abbot Bank is doing badly and may become the victim of a predator. There were rumours of a possible takeover by Bullion, but it says it won’t play the white knight for Abbot by coming to its defence. This leaves Abbot exposed to acquisition, and it may be prey to a big international bank. Abbot does have a poison pill however, in the form of a special class of shares that will be very expensive for a predator to buy.

Companies can also split... conglomerates → divestment/sell-off? demerger (n.), demerge (v.)

Companies can also split... Recent strategic thinking holds that conglomerates are not good. Many conglomerates have divested their non-core businesses, selling them off in order to concentrate on their core business. Blighty Telecom is to split into two, and demerge its fixed-line and mobile business.

LEVERAGED BUYOUTS (home reading, MK: p.105-106) LBO/ MBO –definition conglomerates - explain 1960s v. 1980s 1980s: 2 different values What did raiders really do? What is asset-stripping? Theory v. Practice

LEVERAGED BUYOUTS (home reading, MK: p.105-106) What were the raiders' debts guaranteed by? 3 ideal targets The role of Michael Milken and his bank Raiders‘ arguments in favour of takeovers.