Merger and acquisitions (TIẾNG ANH KINH tế SLIDE)

Unit 7: M&As 1+1=3? Mergers and Acquisitions Reasons for M&As Discussion Why people get married? Why companies merge with/ acquire each other? A takeover/ An Acquisition When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition From a legal 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 A takeover/ An Acquisition A merger happens 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 new company stock is issued in its place Source: http://en.wikipedia.org/wiki/Mergers_and_acquisitions#Distinction_between_mergers_and_acquisitions In practice Actual mergers of equals don't happen very often Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition Ways to acquire a company A Raid or A Takeover Bid Ways to acquire a company A Raid Buying as many of a company’s stocks as possible on the stock market Ways to acquire a company A takeover Bid A public offer to a company’s stockholders to buy their stocks at a certain price during a limited period of time Two types of takeover bid A friendly bid: If a company’s board of directors agrees to a takeover A hostile bid: If the company does not want to be taken over Types of Mergers Horizontal Two companies making the same products combined Vertical A company either acquires or merges with another company in an immediatelyrelated stage of production and distribution Diversification A company acquires another company in an entirely different sphere Integration Horizontal integration When a company gets bigger by acquiring competitors in the same field of activity For example: Electrical retailer Dixon bids for high street competitor Currys Vertical integration -Acquiring companies involved in other parts of the supply chain, usually to make cost savings E.g BP now controls the entire supply chain, from the oil refinery to the petrol pump -Backward integration: Acquiring suppliers of raw materials or components E.g A hotel chain to buy a furniture manufacturer to supply its new hotels -Forward integration: Buying distributor or retail outlets E.g Shell purchases 30 gas stations Diversification Companies can also buy businesses in completely different fields E.g Coca-Cola acquires Columbia Pictures for $700 million Example Types of Mergers Reasons for Horizontal Mergers - - To reduce competition To increase market share To acquire additional plants and equipment To achieve synergy and economies of scales Types of Mergers Reasons for Vertical Mergers - To guarantee the supply and cost of raw material and components - To be closer to the customers, by cutting out the wholesaler for example and dealing directly with the retail trade Reasons for Diversification Mergers - To move into a sector which promises greater growth or profits Types of Mergers Further classification/ M&A Period Name Facet waves 1889 - 1904 First Wave Horizontal mergers 1916 - 1929 Second Wave Vertical mergers 1965 - 1989 Third Wave Diversified conglomerate mergers Fourth Wave Congeneric mergers; Hostile takeovers; Corporate Raiding Fifth Wave Cross-border mergers 1992 - 1998 2000 - Problems with Mergers Damage of a company’s image, goodwill and share value Unmanageable and inefficient structures (such as large conglomerates) Drainage of Human Capital … … … Problems with Mergers Key terms          Takeover Merger Acquisition A raid Buyout LBOs = Leveraged buyouts MBO = Management buyouts Vertical Horizontal Horizontal Diversification Hostile Writing practice Language Practice Cause and Effect Expressions Page 50 Speaking practice Work in groups of or and make a 15-minute presentation on  REASONS FOR MERGERS  PROBLEMS  TYPES WITH MERGERS OF MERGERS ... business and the buyer's stock continues to be traded Source: http://en.wikipedia.org/wiki/Mergers _and_ acquisitions# Distinction_between_mergers _and_ acquisitions A takeover/ An Acquisition A merger. .. http://en.wikipedia.org/wiki/Mergers _and_ acquisitions# Distinction_between_mergers _and_ acquisitions In practice Actual mergers of equals don't happen very often Usually, one company will buy another and, as part... of Mergers Reasons for Horizontal Mergers - - To reduce competition To increase market share To acquire additional plants and equipment To achieve synergy and economies of scales Types of Mergers