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9.

MERGERS AND TAKEOVERS

I.

Are mergers and takeovers common in your country? Think of famous mergers and takeovers that you consider interesting and express your reasons.

II.

Watch the following dialogue between experts in M&A and categorise the sentences as true or false: 1. Matt Simmons considers that size has always to do with quality. 2. According to Matt Simmons, the critical issue in M&A is represented by people. 3. According to John Gibson, the critical issue in M&A is represented by people. 4. According to John Gibson, a bad idea with good people is worse than a good idea with bad people. 5. Neville Henry considers that most of the times, the M&A process excludes firing people. 6. David Johnson emphasizes the good communication existing between the merging parties from the very beginning. 7. Matt Simmons argues that the aim is t build one culture out of two or three cultures. 8. According to John Olson, in the oil and gas industry, it is essential to make the information about reserves transparent. 9. As regards reserves in any type of company, David Johnson and Tom Fry agree that the best practice for having exact information about one company is to use internal auditors. 10. There is general disagreement that it is essential to rely on companies integrity. III. Match the words or phrases with their corresponding definitions: 1. leveraged buyout a. joining together of the stock of two companies, so they become part of the same company and former management preserve their positions; 2. bid b. buying a majority of the shares in a company, and so winning control over the company; 3. amalgamation c. a high-yield, speculative bond, often issued to finance the takeover of a corporation 4. merger d. takeover of a company or controlling interest in a company, using a significant amount of borrowed money. Often the target company's assets serve as collateral for the borrowed money. 5. buyout e. the combination of two or more commercial companies 6. junk bonds f. a special type of security such as life-assurance policy or shares used to secure a bank loan; 7. collateral g. a situation where workers or management buy all the equity (or more than 50%), or buy other assets, and so gain control of a business; 8. takeover h. an offer to buy part of or all the share capital of a company. IV. Fill in the gaps with one of the words defined in the previous exercise:

In a market economy, it is quite common that smaller companies, with reduced financial means, should be taken over by other bigger companies or that two or several companies should merge to form a new company. A 1.. means the purchasing of a company, either entirely, or at least of the controlling percentage of its shares. In the case of small companies with limited assets, in order to make a takeover 2, that company will have to borrow heavily to finance the takeover of a larger company. For these, they might use both their own assets and the assets of the target company or ..3 as security or ..4. for getting the loan. Such a takeover is called a 5.. A takeover bid is an offer to buy made to the shareholders of the target company. The purpose of the 6 is to add that company to their portfolio and turn it into a subsidiary. The bid may be for payment in cash made to the shareholders (cash bid) or for payment by shares of the company making the bid. Sometimes the bid is considered acceptable by the board of the target company and in this case it is said to be a welcome/ friendly takeover bid. In other instances it is considered unfavourable by the board of the target company and then it is termed an unfriendly/ hostile bid. In the latter case, a takeover battle ensues in which the bidder might offer better terms or another bidder comes into the field. A 7.. is the unifying of the two or several companies into a new one with the purpose of increasing efficiency, of doing away with competition. It is usually to the advantage of all parties involved, hence it is considered amicable. All members of the former boards are offered almost similar positions in the new board. Another term for this type of merger is 8.. . V. Which word or phrase from the documents above fits each of these definitions? 1. to receive something of value with the promise of giving something of (usually greater) value at some point in the future; 2. people who own shares in a corporation or mutual fund and who have a right to declared dividends and the right to vote on certain company matters; 3. a list of holdings in securities owned by an investor or an institution; 4. a branch of a company; 5. being the second of two mentioned; 6. to follow as a consequence or result; 7. someone who makes an offer; 8. to make an end of; eliminate; 9. something that related to the past; 10. an organized body of administrators, investigators, managers. VI. Choose the correct answer: 1. A ..company or investment is one that can be trusted and is not likely to fail. a. blue-chip; b. blue; c. trusting; d. blue-cheap. 2. involves buying a company cheaply, selling its assets separately at a profit. a. asset-distribution; b. asset-taking; c. asset-stripping ; d. asset-selling. 3. A 's main purpose is to control another company through owning shares in it. a. branch; b. holding company; c. subsidiary; d. subsidy. 4. A reason for acquisitions is synergy. Synergy includes: a. revenue enhancements; b. cost reductions; c. lower taxes; d. all of the above. 5. Compensation paid to top management in the event of a takeover is called a: a. poison pill; b. golden parachute; c. salary; d. buyout.

6. A is when one company offers to buy another. a. merger; b. takeover bid; c. leveraged buyout d. share. VII. Make up a new word from the word in capital letters: 1. In general, the term .. is used to refer to the consolidation of companies through fusion or absorption. ACQUIRE 2. .. or spin-off is the technical-juridical process through which companies are breaking apart, transferring their patrimony to new born legal entities or to existing ones. MERGE 3. Mergers are ...................... if they take place in same general industries and at the same level of economic activity, without having a mutual buyer/customer or supplier relationship. GENERIC 4. Mergers are ...................... if the companies are in direct competition and share the same markets. HORIZON 5. Specialists call the merger of two companies that have no common business areas ........... CONGLOMERATE 6. A vertical merger takes place between a company and its customer, or a company and its ................. SUPPLY 7. Businesses need to use M&A activities in order to respond to new economic conditions and changes in the strategies of their COMPETE 8. For the US, China has become an attractive environment. ENTREPRENEUR 9. According to this classification, this a .firm. SIZE 10. The way they behaved during the negotiations might . the deal. MINE VIII. Complete the words below to match the given meanings: 1. to grow, to get bigger e--a-d 2. to stop activities that do not make r-t----l--much money and to reduce the number of staff 3. where one company is the only m---p--supplier to a particular market 4. where a parent company sells a d-v--t----subsidiary 5. a large group, owning and h-----g c-----y controlling many companies 6. an illegal agreement between two c--t-or more companies to fix high prices 7. fixing low prices until a p---- w-competitor goes out of business 8. a de-merger, two companies b---k - useparate IX. Translate into English: Retrospeciva 2010- frana la fuziuni si achizitii

Jumatate ca valoare si doua treimi ca volum. Asa ar putea fi descris cel de-al doilea an de scadere pentru piata de fuziuni si achizitii. Pe scurt, s-au subtiat rndurile si portofelele cumparatorilor, iar companiile scoase la vnzare n-au mai fost nici ele la fel de stralucitoare si profitabile ca n anii trecuti. Cel putin pentru piata de fuziuni si achizitii, anul 2010 a fost aproape dezastruos. Cifrele seci spun ca numarul de tranzactii semnate pe parcursul anului s-a ridicat la putin peste 100, cu 25% sub nivelul inregistrat in 2009, dar cu mult mai departe de varful din anul precedent, cand au fost incheiate peste 180 de achizitii, anul fiind mai prost chiar si decat 2005. Lucrurile stau chiar mai rau cand vine vorba de bani; tranzactiile din acest an au insumat doar 716 milioane de euro, cand in alti ani valoarea ajungea de ordinul miliardelor de euro. Pe scurt, suma a fost cam la jumatate fata de cea din 2009, un an mai slab decat 2004, cand piata ajunsese la 1,7 miliarde de euro si, un an mai tarziu, a explodat pana la un varf de 6,8 miliarde de euro, potrivit datelor Raiffeisen Investment. Dincolo de cifre, exista insa si cateva nuante. Cele mai multe dintre achizitiile materializate anul acesta pot fi explicate prin faptul ca preturile nu mai sunt la fel de mari ca in alti ani. Pe de alta parte, cumparatorii au profitat de situatia de criza si de dificultatile economice in care se aflau vanzatorii pentru a obtine conditii mai bune la negociere sau pentru a intra in posesia unor afaceri pe care altfel n-ar fi putut sa le cumpere, fie pentru ca erau prea scumpe, fie pentru ca proprietarii nu erau interesati sa vanda. Practic, asa se justifica atat valoarea mica a pietei, cat si numarul in scadere al tranzactiilor, cu atat mai mult cu cat o parte dintre vanzatori au preferat sa mai astepte pana cand isi va mai reveni economia sau macar pana cand afacerea va fi mai stabila asa incat sa obtina un pret mai bun. (Business Magazine, 22 Dec. 2010, by Ioana Mihai)

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