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Takeover AcquisitionsMerges and acquisitions. Translate the phrases. 1. to take control of 2. to assume the liabilities 3. to assume the assess 4. vertical merger 5. horizontal merger 6. conglomerate merger 7. forward merger 8. backward merger 9. diversified business 10. parent company 11. to acquire a company 12. proxy fight 13. friendly takeover 14. hostile takeover 15. tender offer 16. down raid 17. a reverse take over 18. corporate entity 19. increase in revenues 20. to venture into new business 21. leveraged buyouts 22. equity capital 23. business consolidation 24. to cut production II. Fill in the gaps. a) takeover, b) board of directors, c) tender offer, d) hostile, e) amalgamation,f) merger, g) multinational, h) friendly, i) leverage buyouts. 1.....................may come as a result of negotiation between two companies interested in combining. 2. A company can grow so big that it becomes a.....................company. 3....................occurs when the merger of two companies creates a new company with no one company being dominant. 4. A..................takeover has the consent of the directors of the company whose shares are being acquired. 5. A...................takeover bid is one undertaken against the wishes of the................ 6. A....................in business refers to one company purchasing another. 7. Takeovers using borrowed money are called........................... 8. If a company wants to purchase a majority of shares in another company a................is a popular way to do it. Mergers and Acquisitions (M&A) The term "acquisition" is typically used when one company takes control of another. This can occur through a merger or a number of other methods, such as purchasing the majority of a company's stock or all of its assets. Compared to a merger, an acquisition is treated differently for tax purposes, and the acquiring company does not necessarily assume the liabilities of the target company.
A merger is just one type of acquisition. Mergers may come as the result of a negotiation between two companies interested in combining, or when one or more companies "target" another for acquisition. A merger occurs when one firm assumes all the assets and all the liabilities of another.
One company can acquire another in several other ways, including purchasing some or all of the company's assets or buying up its outstanding shares of stock. Mergers There are two main kinds of mergers (see Figure 1). A horizontal merger describes the joining of companies that offer the same or similar products or services. A vertical merger describes the combining of companies involved in different steps of production or marketing of a product or service. An alternative to the two main types is a conglomerate, which results from a merger of companies that produce unrelated goods or services. Through growth, consolidations,and other means, a company can grow so big that it becomes a multinational company, a large organisation with branches in several countries. Besides, amalgamation occurs when the merger of two companies creates a new company, with no one company being dominant. A merger with one's supplier is a backward one, with one's marketing outlets is regarded as a forward merger.
An example of a horizontal merger is the one between Reebok and Adidas in 2005. At the time, they were the second- and third-biggest makers of sports shoes. The subtitle of an article about the merger summed up the potential benefits of all mergers: "Adidas-Reebok merger could trim costs for companies and maybe even some dollars for consumers." The two companies planned to cut production and distribution costs by combining their operations. This, they hoped, would improve their ability to compete against the largest sport-shoe maker, Nike. More efficient production usually leads to lower prices, which would draw consumers away from Nike.
An example of a vertical merger took place in the late 1990s during a period when the ξι and gas industry was undergoing major consolidations. Shell Oil, which owned more refmer.es. joined with Texaco, which owned more gas stations. This type of merger is vertical, since companies involved in different steps of production (refining) or distribution (getting petrol to customers) combined. Another kind of business consolidation, the conglomerate, is formed when two or more companies in different industries come together. In theory, the advantage of this form of consolidation is that, with diversified businesses, the parent company is protected from isolated economic pressures, such as changing demand for a specific product In practice, it can be difficult to manage companies in unrelated industries. When you use Google to do an Internet search, you are using the services of a multinational company, a large company with branches in several countries. Google's headquarters are in Mountain View, California, but it has branch offices in many other countries. Coca-Cola, McDonald's, Nike, and Sony are all examples of multinational, or transnational, Companies. Takeover Acquisitions Not all companies want to be merged, however. One company can acquire another in several other ways, including purchasing some or all of the company's assets or buying up its outstanding shares of stock. A takeover in business refers to one company purchasing another. Such events resemble mergers but without the formation of a new company.
A takeover is the transfer of control from one company (the target) to another (the acquirer). Normally, the acquiring firm (the bidder) makes an offer for the target firm. In a proxy fight (contest), a group of dissident shareholders will seek to obtain enough votes to gain control of the board of directors.
A friendly takeover consists of a straight buyout of a company, and happens frequently. The shareholders receive cash or (more commonly) an agreed-upon number of shares of the acquiring company's stock.
A bidding firm can also buy another simply by purchasing all its assets. This must be approved by the shareholders of the selling firm. In this regard asset-stripping - selling off the assets of poorly performing or under-valued companies - proved to be highly lucrative. A hostile takeover occurs when a company attempts to buy out another whether the management of the target company likes it or not
A "tender offer" is a popular way to purchase a majority of shares in another company. The acquiring company makes a public offer to purchase shares from the target company's shareholders, thus bypassing the target company's management In order to induce the shareholders to sell, or "tender" their shares, the acquiring company typically offers a purchase price higher than market value, often substantially higher.
Dawn raid is another tactics. During a dawn raid, a firm or investor aims to buy a substantial holding in the takeover-target company's equity by instructing brokers to buy the shares as soon as the stock open. By getting the brokers to conduct the buying of shares in the target company (the ''victim''), the acquirer (the ''predator'') masks its identity and thus its intent.
A reverse takeover can occur in different forms: a smaller corporate entity takes over a larger one; a private company purchases a public one. Pros and cons of a takeover differ from case to case but still there are a few worth mentioning. Pros: - increase in sales / revenues; - venturing into new businesses and markets; - profitability of a target company; - increase in market share. Cons: - reduced competition and choice for consumers in markets; - job cuts; - conflict with new management; - hidden liabilities of a target entity.
Takeovers using borrowed money are called "leveraged buyouts" or LBOs. Leverage means having a large proportion of debt compared to equity capital. Where a company is bought by its existing managers, we talk of management buyout or MBO. Much of the money are conventionally provided by investment banks which convince investors that the high return on debt issued by risky enterprises more than compensated for their riskness. LBOs are financed primarily with junk bonds which provide high yield return along with tremendous risks.
Date: 2015-12-11; view: 1126
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Figure 1. Types of mergers