1. TAKEOVERS, MERGERS AND BUYOUTS

2. + http://www.youtube.com/watch?v=vdjigFRQh7g
Listen to the explanations of the words:
restructuring, takeover, merger, buyout
Restructuring means:
a)___________________________
b) __________________________
c) __________________________
Takeover is _____________________________. It is also called a _______________________
A merger is ________________________________

3. GROWTH OF COMPANIES 1. invest in R&D new products
2. diversify enter new markets
3. take over other companies
4. merge with another company

4. reasons for taking over or combining with other companies
reducing competition
reinforcing
company’s position
rationalizing production
reasons for taking over or combining with other companies

5. take over = buy = acquire (part-ownership)

6. MERGERS company too big to buy to merge = combine the two
companies to form a
single new one

7. TAKEOVER RAID b) TAKEOVER BID
buying as many of a company’s stocks on the stock market
demand increases the stock price rises
b) TAKEOVER BID
public offer to buy the stocks at a certain price during a
limited period of time
a) friendly bid / friendly takeover (the board agrees)
b) hostile bid / hostile takeover (the board does not agree)

8. INVESTMENT BANKS large mergers / acquisitions departments
analyze the value of listed companies
earn high fees

10. TAKEOVERS horizontal integration 2. Vertical integration
acquiring a competitor in the same field of activity:
a) a larger market share
b) reduces competition
2. Vertical integration
taking over a business involved in the supply chain to achieve
cost savings:
a) backward integration – acquiring suppliers of raw materials
b) forward integration – taking over distributors or retail outlets

11. BUYOUTS takeovers large conglomerates (different firms) inefficient
undervalued on the stock market
market capitalization lower than assets
financiers – corporate raiders
private equity funds

12. RAIDERS – LEVERAGED BUYOUTS
leveraged = financed by borrowed capital
issue bonds borrow money
buy the companies
asset-stripping (sell off the subsidiaries / assets)
pay back the bonds
earn profit

13. LEVERAGED BUYOUTS (LBOs)
Takeovers using borrowed money against the security of the shares to be bought
Leverage means having a large proportion of debt compared to equity capital
Buying companies in order to strip assets

14. HISTORY OF LBOs 1960s – conglomerates 1980s - recession
- companies with good
earnings but low stock prices
- assets were worth more than
their market price (less dividend)
- central management not efficient

15. Targets for buyouts Companies with huge cash reserves
Companies with successful subsidiaries
Companies in fields not sensitive to a recession (food/tobacco)

17. Find out why growing through acquisition is a
Find out why growing through acquisition is a
perfect way to grow. The aims are:
to conquer __________________________
to acquire __________________________ quickly
to secure ___________________________people
to cut ____________________of failure
and finally
to focus on ________________ and _______________________.

18. Why should companies beware of the merger?
Why should companies beware of the
merger?
Answer the following questions: 
What is a merger?
Why do companies merge?
What is the example for a horizontal merger? What does their combining bring?
What is the example for a vertical merger? Why is this combination good?

19. FIND THE WORDS THAT MEAN THE FOLLOWING:
To expand into new fields. _________________
Buying another company’s shares on the stock exchange, hoping to persuade enough other shareholders to sell to take control of the company. _________________
A public offer to a company’s shareholders to buy their shares at a particular price during a particular period. _______________
To merge or take over other firms producing the same type of goods or services. _____________________
A merger with or the acquisition of one’s suppliers. ___________________
Joining with firms in other stages of the production or sale of a product. _______________
A merger with or the acquisition of one’s marketing outlets. ___________
A large organisation formed by joining together a group of companies with different business activities. __________________
Takeovers using borrowed money. ______________
Selling off the assets of poorly performing or under-valued companies. ______________
Bonds that are considered to be risky but which pay a high rate of interest.

20. FILL IN THE BLANKS:
A company that wants to grow or __________can launch a _________, simply buy a large quantity of another company’s shares on the _____________. This will immediately increase the __________price, and may persuade other shareholders to sell for the raider to take _________ of the company.
It is also possible to make a __________ bid: a public _______ to a company’s shareholders to buy their shares. A _________takeover has the consent of the board of the company whose shares are being acquired. A __________ takeover bid is against the wishes of the board of directors. A company can attempt to find a _______________– another buyer whom they prefer.

21. A company that wants to grow or diversify can launch a raid, simply buy a large quantity of another company’s shares on the stock exchange. This will immediately increase the share price, and may persuade other shareholders to sell for the raider to take control of the company. It is also possible to make a takeover bid: a public offer to a company’s shareholders to buy their shares. A friendly takeover has the consent of the board of the company whose shares are being acquired. A hostile takeover bid is against the wishes of the board of directors. A company can attempt to find a white knight – another buyer whom they prefer.