u7- merger and acquisitions

8/3/2019 U7- Merger and Acquisitions

1/20

Unit 7: M&As

1 + 1 = 3 ?


2/20

Mergers and Acquisitions


3/20

Reasons for M&As

Discussion

1. Why do people get married?

2. Why do companies merge with/

acquire each other?


4/20

A takeover/ An Acquisition

When one company takes overanotherand

clearly establishes itself as thenew owner,

the purchase is called an acquisition. From alegal point of view, the target company

ceases to exist, the buyer "swallows" the

business and the buyer's stock continues to

be traded.

Source: http://en.wikipedia.org/wiki/Mergers_and_acquisitions#Distinction_between_mergers_and_acquisitions


5/20

A takeover/ An Acquisition

A mergerhappens when two firms agree to

go forward as a single new company rather

than remain separately owned and operated.This kind of action is more precisely referred

to as a "merger of equals". The firms are

often of about the same size. Both

companies' stocks are surrendered and newcompany stock is issued in its place.

Source: http://en.wikipedia.org/wiki/Mergers_and_acquisitions#Distinction_between_mergers_and_acquisitions


6/20

In practice

Actual mergers ofequals don'thappen very often.

Usually, one company will buyanotherand, as part of the deal's

terms, simply allow the acquired

firm to proclaim that the action isa mergerofequals, even if it is

technically an acquisition.


7/20

Ways to acquire a company

A Raidor

A TakeoverBid


8/20


A RaidBuying as many of acompanys stocks as possible

on the stock market.


9/20


A takeoverBidA public offer to a companysstockholders to buy their

stocks a a certain price during

a limited period of time.


10/20

Types of MergersHorizontal

Two companies making the same

products combined

Vertical

A company either acquires or merges withanother company in an immediately-

related stage of production and

distribution.

Diversification

A company acquires another company in

an entirely different sphere.


11/20

Example


12/20

Example


13/20

Types of Mergers

Reasons forHorizontal Mergers

- To reduce competition- To increase market share

- To acquire additional plants and

equipment- To achieve synergy and economies of

scales


14/20

Types of Mergers

Reasons forVertical Mergers- To guarantee the supply and cost of raw

material and components.

- T

o be closer to the customers, by cuttingout the wholesaler for example and

dealing directly with the retail trade.

Reasons forDiversification Mergers

- To move into a sector which promises

greater growth or profits.


15/20

Types of Mergers

Further classification/ M&A wavesPeriod Name Facet

1889 - 1904 First Wave Horizontal mergers

1916 - 1929 Second Wave Ver tical mergers

1965 - 1989 Third WaveDiversified conglomerate

mergers

1992 - 1998 FourthWave

Congeneric mergers;

Hostile takeovers;

Corporate Raiding

2000 - FifthWave Cross-bordermergers


16/20

Problems with Mergers

Damage of a companys image, goodwill and

share value.

Unmanageable and inefficient structures(such as large conglomerates)

Drainage ofHuman Capital


17/20

Problems with Mergers


18/20

Key terms

Takeover Merger

Acquisition

Araid

Buyout LBOs = Leveraged buyouts

MBO = Management buyouts

Vertical

Horizontal

Horizontal

Diversification

Hostile


19/20

Writing practice

LanguagePractice

Cause and Effect Expressions

Page 50


20/20

Speaking practice

Work in groups of 3 or4 and make a 15-minute

presentation on

REASONS FOR MERGERS

PROBLEMS WITH MERGERS

TYPES OF MERGERS

u7- merger and acquisitions

Documents