Review:Stocks vs. Bonds investopedia/video/play/stocks-versus-bonds

1. Review:Stocks vs. Bonds http://www.investopedia.com/video/play/stocks-versus-bonds Stocks and bonds are the two biggest 1… of most 2 … . Stocks usually provide a steady 3…, and bonds tend to ensure a 4…. . Bonds can be bought from 5…, and a careful selection of stocks will include 6… . A combination of stocks and bonds is good for all kinds of investors. For aggressive investors, bonds may 7... the risk of stocks and stabilize the 8… of the market, while stocks can help 9…. investors 10… against the risk of inflation.

2. Security (finance)... ... a financial investment such as a bond, a share/stock or a d _ _ _ v _ _ _ v _.

3. Security (finance)... ... a financial investment such as a bond, a share/stock or a d e r i v a t i v e.

4. Derivatives MK, U 18, p 92

5. DERIVATIVE (finance) something such as an option, or a future, based on underlying assets such as shares, bonds, and currencies. Longman Business English Dictionary Cro =derivat, derivatni instrument, izvedenica

6. Derivative:A security whose price is d_ p _ _ _ _ _ t upon or d_ _ _ _ _ d from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by f _ _ _ _ _ _ _ _ _ s in the underlying asset. The most common u _ _ _ _ _ _ _ _ g assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.  http://www.investopedia.com/terms/d/derivative.asp

7. MK, p 92 Vocabulary 1F 2A 3E 4D 5C 6B 7H 8G

8. Financing capital: discuss opportunities & threats • government subsidies • bank loans • issuing bonds • issuing shares  acquisitions: buyouts and takeovers

9. Why? to reinforce your position to reduce competition to rationalize production to diversify products/markets to gain access to new technology... → MK, p 105

10. Unit 21: Takeovers Pg 1 • How can companies use their profits? • Provide synonyms of acquire: • Explain the difference between takeovers and mergers • Explain: supply chain • Explain the difference between horizontal and vertical integration • Explain the difference between forward and backward integration • 1 Horizontal integration A enables cost savings2 Vertical integration B increases market share and reduces competition

11. Unit 21: Takeovers – Pg 1 • How can companies use their profits? • Provide synonyms of acquire: attain, buy, get, purchase, take, take possession of • Explain the difference between takeovers and mergers • Explain: supply chain = the supply chain for most products will encompass all the companies manufacturing parts for the product, assembling it, delivering it and selling it. • Explain the difference between horizontal and vertical integration • Explain the difference between forward and backward integration • 1 Horizontal integration A enables cost savings2 Vertical integration B increases market share and reduces competition

12. Pg 2 • Explain the difference between a raid and a takeover bid ● Explain the difference between a friendly and a hostile bid

13. Vocabulary • to bid (v irregular: bid, bid) • to offer to pay a particular price for sth. The company is bidding 910p a share for control of AB Ports... The bidder is interested in... • a bid (n) • a price offered to buy sth. such as goods, property, shares, bonds (Longman BED) Takeover bids: • unwanted / unsolicited / hostile<>friendly bid

14. Pg. 3 • Why do investment banks encourage companies to take over other companies? Pg. 4 • Explain conglomerate • What does LBO stand for? • L _ _ _ _ _ _ _ d b _ _ _ _ _ s • Which globally famous Hollywood movie involves a male character who specializes in LBOs? • Do you remember what it is he does?

15. Pg. 4 cont. • Explain: undervalued on the stock market • Explain: market capitalization • Explain: leveraged • Explain: asset-stripping • Why is the risk involved in LBOs small? HW: Vocabulary, p 106 & complete

16. TYPES • ACQUISITION / TAKEOVER • FRIENDLY TAKEOVER • HOSTILE TAKEOVER • MERGER • JOINT VENTURE • LEVERAGED BUYOUT • CORPORATE RAID

17. JOINT VENTURE Cooperation of two or more individuals or businesses, each agreeing to share profit, loss and control, in a specific enterprise Combining two or more companies to form a new one Corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm  MERGER ACQUISITION / TAKEOVER

18. FRIENDLY TAKEOVER A takeover that a company being taken over agrees to. A takeover that a company taken  over does not want and doesn’t agree to. Acquisition of another company using borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. HOSTILE TAKEOVER LEVERAGED BUYOUT

19. buying a large number of shares in a corporation with undervalued assets to obtain voting rights to increase share value and thus generate a massive return VOCABULARY to make a takeover bid to merge to use the poison pill to take over to find a white knight to acquire HW: Handouts: Takeovers and LBOs CORPORATE RAID

20. Arguments in favor of takeovers and buyouts: C raiders will use the assets more efficiently, cut costs and increase shareholder value E threat of takeovers – motivates managers F a larger company will have a stronger position on the market H innovation is expensive and risky Arguments against takeovers and buyouts: A central management is a hindrance B disincentive to long-term planning or capital investment D can lead to job losses G conglomerates may become unmanageable I traditionally, the best companies have beaten their competitors rather than buying them

21. What is missing? • ~ between • ~ talks • ~ proposal • ~ agreement • conglomerate ~ • defensive ~ • horizontal ~ • vertical ~

22. What is missing? MERGER • a mergerbetween similar banks but to merge with a similar bank • merger talks • merger proposal n. + n. • merger agreement merger ≈ integration • conglomerate merger • defensive merger • adj. + n. • horizontal merger / integration • vertical merger / integration

23. What is missing? friendly ~ hostile/unfriendly ~ leveraged ~ creeping ~ ~ battle ~ bid What is missing? leveraged ~ (LBO) employee/staff ~ management ~ (MBO)

24. What is missing? TAKEOVER friendly takeover hostile/unfriendly takeover leveraged takeover creepingtakeover takeover battle takeover bid What is missing? BUYOUT leveraged buyout (LBO) employee/staff buyout management buyout (MBO)

25. Review: M & A

26. Mergers and acquisitions Success Money Investments in R&D Acquisition of other companies (t__________, b_______) Merger - integration: Comp. in unr___ed fieldsConglomerates Competitors =horizontal m/i verDistributors=forwardm/iLBO tiSuppliers= backwardm/i cal stripped of assets & split up akeovers uyouts elat a_________ financed by debt a financed by debt cquisitions

27. Mergers and acquisitions Success Money Investments in R&D Acquisition of other companies (takeovers, buyouts) Merger - integration: Comp. in unrelated fieldsConglomerates Competitors =horizontal m/i verDistributors=forwardm/iLBO tiSuppliers= backwardm/i cal stripped of assets & split up acquisitions financed by debt