TAKEOVERS, MERGERS
AND BUYOUTS
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• http://www.youtube.com/watch?v=vdjigFRQh7g
• Listen to the explanations of the words:
restructuring, takeover, merger, buyout
Learn Business English Conversation 93 (restructuring, merger, buyout, takeover) [www.keepvid.com].mp4
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Restructuring means:
a)___________________________
b) __________________________
c) __________________________
Takeover is _____________________________. It is also called a
_______________________
A merger is ________________________________
GROWTH OF COMPANIES
1. invest in R&D
2. diversify
new products
enter new markets
3. take over other companies
4. merge with another company
reinforcing
reducing
competition
company’s
position
rationalizi
ng
production
reasons for taking over or
combining with other
companies
take over = buy = acquire
(part-ownership)
MERGERS
company too big to buy
to merge = combine the two
companies to form a
single new one
TAKEOVER
a) RAID
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)
INVESTMENT BANKS
- large mergers / acquisitions departments
- analyze the value of listed companies
- earn high fees
TAKEOVERS
1. horizontal 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
BUYOUTS
takeovers
large conglomerates
(different firms)
inefficient
undervalued on the stock market
market capitalization lower than assets
financiers –
corporate raiders
private equity funds
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
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
HISTORY OF LBOs
v 1960s – conglomerates
v 1980s - recession
- companies with good
earnings but low stock prices
- assets were worth more than
their market price (less dividend)
- central management not efficient
Targets for buyouts
§ Companies with huge cash reserves
§ Companies with successful
subsidiaries
§ Companies in fields not sensitive to
a recession (food/tobacco)
http://www.youtube.com/user/businesssalereport?blend=23&ob=5#p/a/u/0/0lvnfteI9yE
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
_______________________.
http://www.youtube.com/watch?v=yWHpsCH7ad0&feature=related
Why should companies beware of the
merger?
http://www.youtube.com/watch?v=QEfxnoXX21s&feature=related
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?
FIND THE WORDS THAT MEAN THE FOLLOWING:
1. To expand into new fields. _________________
2. Buying another company’s shares on the stock exchange, hoping to persuade
enough other shareholders to sell to take control of the company. _________________
3. A public offer to a company’s shareholders to buy their shares at a particular price
during a particular period. _______________
4. To merge or take over other firms producing the same type of goods or services.
_____________________
5. A merger with or the acquisition of one’s suppliers. ___________________
6. Joining with firms in other stages of the production or sale of a product.
_______________
7. A merger with or the acquisition of one’s marketing outlets. ___________
8. A large organisation formed by joining together a group of companies with different
business activities. __________________
9. Takeovers using borrowed money. ______________
10. Selling off the assets of poorly performing or under-valued companies. ______________
11. Bonds that are considered to be risky but which pay a high rate of interest.
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.
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.