1. Takeovers, mergers and buyouts
MK, Unit 21
Handout1
Handout 2 photocopy: Market Leader

2. How can a company grow? Internally -- organic growth
Externally -- integration 2

3. INTERNAL GROWTH How? Increasing production Entering new markets
Innovation: launching a new product
Line extension
adding a similar type of product to the product line
Diversification
adding a new type of product to the range 3

4. EXTERNAL GROWTH How?
1. Merger (v.: to merge, to amalgamate, to unite) 2. Acquisition (v. to acquire, to take over, to buy, to purchase) Friendly takeover Hostile takeover (e.g., raid (v. to raid)) 4

5. Stakes A stake/ an interest/ a holding in a company
A majority stake/ interest/ holding
A minority stake/ interest/ holding
The shares that one investor has in a company.

6. Find definitions for these terms (p. 105)
Horizontal integration
Vertical integration: backward, forward
A merger
A raid
A takeover bid
A friendly bid
A friendly takeover
A hostile bid
A hostile takeover
M&A
Leveraged
LBO
Being undervalued on the stock market
Asset-stripping

7. Reading, MK, p. 105 How do successful companies use their profits?
Why do companies take over other companies?
When do mergers and acquisitions happen?
Explain the difference between a bid and a takeover.
Why is a raid unlikely to result in the acquisition of a controlling interest?
Who helps companies in mergers and acquisitions?
Do you think that it is in the interest of banks to convince a company to acquire another?
When do LBOs happen?
How do raiders make money?

8. Types of integration (1)
Horizontal integration
Vertical integration
Forward
Backward
Lateral/Conglomerate Integration:
Two unrelated firms joining.
Draw a diagram illustrating these types of integration.
Do drawing!!! 8

9. Types of integration: name the arrows
Distributor
Producer
(e.g. chairs)
Competition
Supply chain
Unrelated business
(e.g. a tourist agency)
Supplier

10. Types of integration Supply chain Horizontal Forward vertical
Distributor
Horizontal
Forward vertical
Producer
(e.g. chairs)
Competition
Supply chain
Backward vertical
Conglomerate
Unrelated business
(e.g. a tourist agency)
Supplier

11. Find word partnerships in the text
new markets
a company
share
savings
(part-)ownership
a raid/a takeover bid
a fee
a conglomerate
synergy
Enter
Take over
Market
Merge with
Cost
Acquire
Launch
Earn
Form
Achieve

12. LBO (Leveraged buyout)
Financed, assets, 'asset stripping’, collateral, cash flow, acquisition, capital
The ___ of another company ___ by a significant amount of borrowed ___(bonds or loans). Often, the assets of the company being acquired are used as ___ for the loans in addition to the ___ of the acquiring company. After the purchase, the loan is paid from the firm's ___ and/or by selling off its assets (called ___).

13. LBO (Leveraged buyout)
The acquisition of another company financed by a significant amount of borrowed capital (bonds or loans). Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. After the purchase, the loan is paid from the firm's cash flow and/or by selling off its assets (called 'asset stripping').

14. Listening
Listen to the speaker and write down the keywords of what he is saying.

15. Read the text on the handout and decide if these statements are true or false.
The majority of mergers take place in the USA.
Many international mergers are failures.
Most attention is concentrated on what to do after the merger is completed.
Many mergers are done too quickly.
Connecting different computer systems together is not usually a problem.
High salaries were given to Chrysler managers as compensation for the merger with Daimler-Benz.
Chrysler has won many prizes for its production methods.
Engineers have a high status at Daimler-Benz.
1F, 2T, 3F, 4T, 5F, 6F, 7F, 8T

16. Listening (1) https://www.youtube.com/watch?v=9rvwB1W-mqI
What did you find out about the Daimler – Chrysler merger’s success?
Reuters: Daimler and Chrysler to part

17. Listening (2) Who are Dieter Zetsche and John Snow?
In what context were the following numbers mentioned?
$7.4 billion
80.1%
13,000
$1.5 billion
The amount Cerberus paid for Chrysler group
Cerberus’s stake in Chrysler Group
The number of workers who will lose their job
Chrysler’s operating loss in 2006

18. “Why do the British welcome foreign ____, but dread being ______?”
Practice: Fill in the blanks with the correct form of the words: to merge, takeover, sale, to take over, offer, deal
“Why do the British welcome foreign ____, but dread being ______?”
“The _____ of Cadbury by Kraft”
“Rangers ___ confirmed”
“Rangers ____ closed”
“Rangers ____ Accepted”
US carmaker Chrysler and Italian carmaker Fiat _____ to create worlds sixth largest global auto giant.

19. Solutions:
“Why do the British welcome foreign takeovers, but dread being taken over?”
“The takeover of Cadbury by Kraft”
“Rangers sale confirmed”
“Rangers deal closed”
“Rangers Offer Accepted”
US carmaker Chrysler and Italian carmaker Fiat merged to create worlds sixth largest global auto giant.