Pop quiz 3
Results
Kristian Krnić 1bp
Božidar Klarin-Petrina 1bp
MacKenzie Moore 1bp Ema Gorup 2pb
Dan Stričević 1bp
Zvonimir Medvidović 1bp
Martin Obad 1bp
Iva Pervan 2bp
Financing capital:
discuss opportunities & threats
• government subsidies
• bank loans
• issuing bonds
• issuing shares 
acquisitions: buyouts and takeovers
Why?
to reinforce your position
to reduce competition
to rationalize production
to diversify products/markets
to gain access to new technology...
→ MK, p 105
Unit 21: Takeovers
Pg 1
• How can companies use their profits?
• Provide synonyms of acquire:
•
•
•
•
attain, buy, get, purchase, take, take possession of
Explain the difference between takeovers and mergers
Explain: supply chain vs.
distribution chain
Explain the difference between horizontal and vertical
integration
Explain the difference between forward and backward
integration
1 Horizontal integration
A enables cost savings
2 Vertical integration
B increases market share
and reduces competition
Unit 21: Takeovers
Pg 1
• How can companies use their profits?
• Provide synonyms of acquire:
attain, buy, get, purchase, take, take possession of
• Explain the difference between takeovers and mergers
• Explain: supply chain
vs. distribution chain
• Explain the difference between horizontal and vertical
integration
• Explain the difference between forward and backward
integration
• 1 Horizontal integration
A enables cost savings
2 Vertical integration
B increases market share
and reduces competition
Mergers (integrations) with:
competitors = horizontal integration
v
e
r distributors = forward integration
t
i
c suppliers = backward integration
a
l
Pg 2
• Explain the difference between a raid and a
takeover bid
Advantages
Disadvantages
A raid
A takeover bid
Explain the difference between a friendly and a
hostile bid
●
Vocabulary
• to bid (v irregular: bid, bid)
– to offer to pay a particular price for sth.
The company is bidding 910p a share for control
of AB Ports...
The bidder is interested in...
• a bid (n)
– a price offered to buy sth. such as goods,
property, shares, bonds
(Longman BED)
Takeover bids:
- unwanted / unsolicited / hostile<>friendly bid
Pg. 3
• Why do investment banks encourage
companies to take over other companies?
Pg. 4
•
•
•
•
Explain conglomerate
What does LBO stand for?
L_______d b_____s
Which globally famous Hollywood movie
involves a male character who specializes
in LBOs?
• Do you remember what it is he is doing in
the movie?
Pg. 4 cont.
• Explain: undervalued on the stock market
• Explain: market capitalization
• Explain: leveraged
• Explain: asset-stripping
• Why is the risk involved in LBOs small?
HW: Vocabulary, p 106 & complete
→Takeovers handout
→ LBO handout
What is missing?
•
•
•
•
~
~
~
~
between
talks
proposal
agreement
• conglomerate ~
• defensive ~
• horizontal ~
• vertical ~
What is missing? MERGER
• a merger between similar banks
but to merge with a similar bank
• merger talks
• merger proposal
n. + n.
• merger agreement
merger ≈ integration
• conglomerate merger
• defensive merger
•
adj. + n.
• horizontal merger / integration
• vertical merger / integration
What is missing?
friendly ~
hostile/unfriendly ~
leveraged ~
creeping ~
~
battle
~
bid
What is missing?
leveraged ~
employee/staff ~
management ~
(LBO)
(MBO)
What is missing? TAKEOVER
friendly takeover
hostile/unfriendly takeover
leveraged takeover
creeping takeover
takeover battle
takeover bid
What is missing? BUYOUT
leveraged buyout (LBO)
employee/staff buyout
management buyout (MBO)
Review: M & A
Mergers & acquisitions → asset stripping
Success → Retained earnings → Investments in R&D
Acquisition of other companies
(t________,
akeovers b______)
uyouts
Merger (integration with):
companies in un___
related fields
Conglomerates
LBO
a________
cquisition
financed
by debt
stripped of assets
& split up
TYPES
1.
2.
3.
4.
5.
6.
7.
ACQUISITION / TAKEOVER
FRIENDLY TAKEOVER
HOSTILE TAKEOVER
MERGER
JOINT VENTURE
LEVERAGED BUYOUT
CORPORATE RAID
Cooperation of two or more individuals or
businesses, each agreeing to share profit, loss
and control, in a specific enterprise JOINT
VENTURE
Combining two or more companies to form a new
one
MERGER
Corporate action in which a company buys most, if
not all, of the target company's ownership stakes
in order to assume control of the target firm
ACQUISITION / TAKEOVER
A takeover that a company being taken over
agrees to.
FRIENDLY TAKEOVER
A takeover that a company taken over does not
want and doesn’t agree to. HOSTILE TAKEOVER
Acquisition of another company using borrowed
money (bonds or loans) to meet the cost of
acquisition. Often, the assets of the company
being acquired are used as collateral for the
loans in addition to the assets of the acquiring
company.
LEVERAGED BUYOUT
• buying a large number of shares in a corporation
with undervalued assets to obtain voting rights to
increase share value and thus generate a
CORPORATE RAID
massive return
VOCABULARY
To make a takeover bid
to merge
To use the poison pill
to take over
To find a white knight
to acquire