Apr 18, 2016

Finance English practice: Unit 39 — Mergers and Takeovers

13 cards
, 58 answers
  • Complete the sentences below. Use the key words if necessary.
    • Mergers, takeovers and joint ventures

      key words
      merger      ○      takeover      ○      acquisition      ○      takeover bid      ○      raid      ○      joint venture


      In the modern business world, the ownership of companies often changes. This can happen in different ways:
      • a : this is when two companies join together to form a new one.
      • a or : this is when one company buys another one. This can happen in two ways. Firstly, a company can offer to buy all the shareholders’ shares at a certain price (higher than the market price) during a limited period of time. This is called a . Secondly, a company can buy as many shares as possible on the stock market, hoping to gain a majority. This is called a .

      Investment banks have mergers and acquisitions (M&A) departments that advise companies involved in mergers and takeovers.

      Companies can also work together without a change of ownership. For example, when two or more companies decide to work together for a specific project or product, this is called a .

      Hostile or friendly?

      key words
      friendly bid      ○      friendly takeover      ○      hostile bid      ○      hostile takeover      ○      white knight      ○      poison pill defence


      There are two types of takeover bid. If a company’s board of directors agrees to a takeover, it is a (and if the shareholders agree to sell, it becomes a ). If the company does not want to be taken over, it is a (and if successful, a ). Companies have various ways of defending themselves against a hostile bid. They can try to find a — another company that they would prefer to be bought by. Or they can use the (‘eat me and you’ll die!’) which involves issuing new shares at a big discount. This reduces the holding of the company attempting the takeover, and makes the takeover much more expensive.

      Integration

      key words
      Horizontal integration      ○      Vertical integration      ○      backward integration      ○      forward integration      ○      diversification


      is when a company gets bigger by acquiring competitors in the same field of activity. is acquiring companies involved in other parts of the supply chain, usually to make cost savings. There are two possibilities:
      is acquitting suppliers of raw materials or components;
      is buying distributors or retail outlets.
      Companies can also buy businesses in completely different fields, which is known as . This can be done to reduce the risk involved in operating in only one industry — but diversifying into completely different industries is a risk itself.

    • Complete the sentences.
      • I want to work in the mergers and  . . . 
        acquisitions
        department of an investment bank in New York.
        • merger
        • acquisitions
        • joint venture

      • Beverage Partners Worldwide is a  . . . 
        joint venture
        between the Coca-Cola and Nestle companies, making ready-to-drink teas and coffees.
        • joint venture
        • acquisitions
        • merger

      • After their  . . . 
        merger
        , Union Bank of Switzerland and Swiss Bank Corporation had combined assets of $600bn.
        • merger
        • split

      • We started with a  . . . 
        raid
        , buying all the stocks available on the stock exchange. That got us 15% of their stocks. Then we made a  . . . 
        takeover bid
        , offering 20% above the market price, and bought another 40% of the company.
        • merger, friendly bid
        • raid, takeover bid

      • Telecom Italia is looking for a  . . . 
        white knight
        to rescue it from a  . . . 
        hostile
        takeover by rival Olivetti.
        • white knight, friendly
        • white knight, hostile

      • Colonial has agreed to a  . . . 
        friendly
        takeover by Commonwealth Bank.
        • friendly
        • hostile

      • Mackenzie Financial Corp is planning a huge rights issue as a  . . . 
        poison pill
        to fight off C.I. Fund Management’s takeover offer.
        • friendly bid
        • poison pill

    • Match the newspaper headlines with the processes.
      • Shell Purchases 30 Gas Stations —  . . . 
        forward integration
        • forward integration
        • vertical integration
        • backward integration
        • diversification
        • horizontal integration

      • Hotel Chain to Buy Furniture Manufacturer to Supply Its New Hotels —  . . . 
        backward integration
        • vertical integration
        • horizontal integration
        • forward integration
        • backward integration
        • diversification

      • Electrical Retailer Dixons Bids for High Street Competitor Currys —  . . . 
        horizontal integration
        • diversification
        • horizontal integration
        • forward integration
        • vertical integration
        • backward integration

      • Coca-Cola Acquires Columbia Pictures for $700 Million —  . . . 
        diversification
        • backward integration
        • vertical integration
        • diversification
        • forward integration
        • horizontal integration

      • BP Now Controls the Entire Supply Chain, From the Oil Refinery to the Petrol Pump —  . . . 
        vertical integration
        • horizontal integration
        • forward integration
        • backward integration
        • diversification
        • vertical integration

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