Mastering Takeovers and Mergers: Strategies for Success

1. MARKET LEADER 4 Unit 13 Takeovers and Mergers

2. 2 3 4 5 6 1 1 Starting up 1 1 1 Vocabulary: Describing takeovers and mergers Listening: Making acquisitions Reading: Why mergers fail Skills: Summarising in presentations Case study: Group Bon Appetit PLC

3. MARKET LEADER 4 Starting up

4. Starting up-A • Think of recent takeover or merger. What kinds of business were involved? • Were both companies successful before it happened? What about now? 1 Starting up

5. Starting up-B • Think about the companies involved, their employees and the consumer. • What are the advantages and disadvantages of: • (a) takeovers? • (b)mergers? 1 Starting up

6. Starting up-B • Advantages of takeovers : • The existing owner of a takeover target can realize the value of the company • The taken over may get a new lease of life and gain better access to investment finance • The acquiring company may gain new products to sell, and new markets to sell them in • Benefits promised to shareholders often include lower costs, for example, lower overheads. 1 Starting up

7. Starting up-B • Disadvantages of takeovers: • Employees might become a part of the redundant organizational personnel and will probably lose their jobs. 1 Starting up

8. Starting up-C • Studies show that 65% of mergers do not achieve their expected results. What are the reasons for this, do you think? • poor implementation • incompatible cultures 1 Starting up

9. Starting up-C • What do acquiring companies need to do in order to ensure success? • define how success will be measured • decide in advance which partner’s way of doing things will be adopted by the merged company 1 Starting up

10. identify the advantages that the merged company has, ones that competitors will find it hard to copy • move quickly so that competitors do not have time to catch up and overtake. 1 Starting up

11. 13 Takeovers and mergers MARKET LEADER 4 Vocabulary Describing takeovers and mergers

12. 2 Vocabulary -A • 1. alliance • (f) an agreement between two or more organisations to work together • 2. joint venture • (c) a business activity in which two or more companies have invested together • 3. LBO (leveraged buyout) • (e) buying a company using a loan borrowed against the assets of the company that’s being bought Vocabulary: Describing takeovers and mergers

13. 2 Vocabulary -A • 4. MBO (management buyout) • (d) when a company’s top executives buy the company they work for • 5. merger • (b) two or more companies joining to form a larger company • 6. takeover/acquisition • (a) getting control of a company by buying over 50%of its shares Vocabulary: Describing takeovers and mergers

14. acquisition bid hostile launch make stake take takeover target 2 Vocabulary -B Make as many expressions as you can from the words in the box. For example, “to take a stake in a business” Vocabulary: Describing takeovers and mergers

15. 2 Possible answers • acquisition bid • bid target • hostile acquisition • hostile bid • hostile takeover • hostile takeover bid • takeover bid • takeover target Vocabulary: Describing takeovers and mergers

16. 2 • launch a bid • launch a hostile bid • launch a hostile takeover • launch a hostile takeover bid • make a bid • make a hostile bid • make a hostile takeover bid • make an acquisition • take a stake Vocabulary: Describing takeovers and mergers

17. 2 Vocabulary -C • 1. Investors dismissed Lafarge’s 3.4 billion……………………………………….. ………………………………………………. for Blue Circle yesterday, rejecting the offer on the grounds that it was ‘wholly inadequate’. (The Times) take over bid / hostile bid / acquisition bid Vocabulary: Describing takeovers and mergers

18. 2 Vocabulary -C • 2. The Boards of Glaxo Wellcome and Smithkline Beecham announce that they have unanimously agreed the terms of a proposed…………………………………… of equals to form Glaxo Smithkline. The new company is expected to generate substantial operational synergies. (Press release) merger Vocabulary: Describing takeovers and mergers

19. 2 Vocabulary -C • 3. Sotheby’s, the auction house, is forming a……………………………………..with Amazon.com, the Internet retailer, to create a new on-line auction service. As part of the deal Amazon .com will……………………………………..in Sotheby’s. (The Economist) jointventure take a stake Vocabulary: Describing takeovers and mergers

20. 13 Takeovers and mergers MARKET LEADER 4 Listening Making acquisitions

21. New words in listening materials • synergy: the additional effectiveness when two or more companies or people combine and work together tactic • momentum: the ability to keep increasing, developing, or being more successful • constraint: something that limits your freedom to do what you want

22. hamstring: verb. to make someone unable to take the action they want or need to take, especially by restricting them: • sycophant: someone who praises powerful people too much because they want to get something from them - used in order to show disapproval:

23. 3 Listening -A Match these words with their meanings • 1. asset • (d) sth. belonging to a business that has value or the power to earn money • 2. cost structure • (a) an organisation’s different costs and the way they are related to each other • 3. integration • (e) combining two companies so that they can work closely and effectively together Listening: Making acquisitions

24. 3 Listening -A • 4. momentum • (f) The ability to keep increasing ,developing or being more successful • 5. projections • (c) Calculations about, for example, what the size, amount or rate of sth. will be in the future • 6. synergy • (b) advantage produced when two organizations combine resources. Listening: Making acquisitions

25. 3 Listening -B • 13.1 Listen to the first part of an interview with Nigel Portwood, President and Chief Executive Officer at Pearson Education. What essential preparatory steps should a company take to make a successful acquisition? Listening: Making acquisitions

26. 3 Listening -B • Keys: • Ensure you have a clear strategy: this will help you understand which companies are the most suitable targets for acquisition. • If there is a suitable candidate, analyse its products, customers, sales and cost structure. Think about how you will invest in the company if you buy it, and what the financial consequences will be. Listening: Making acquisitions

27. 3 Listening -B • Keys: • Work out how much the company is worth to you and to its current owners. Work out how much more it will be worth to you because of the synergies you see (the benefits, not available to its current owners, that will result when it is combined with your own company). • Work out the tactics of how to buy the company, including how to approach the owners and what price you will offer. Listening: Making acquisitions

28. 3 Listening -C • 13.2 Now listen to the second part of the interviews. What three things need to be done to ensure the successful integration of a newly acquired business? Listening: Making acquisitions

29. 3 Listening -C • Keys: • Plan what you are going to do when you actually take ownership of the acquired company: how you are going to combine it with your own company in relation to its people(=managers and employees),facilities, its (other)assets and its customers, paying great attention to detail. Listening: Making acquisitions

30. 3 Listening -C -- Keep the most important managers and staff in the acquired company on your side. -- Move quickly and don’t lose momentum, because this creates uncertainty. • Keys: Listening: Making acquisitions

31. 3 Listening -D • 13.3 Listen to the last part of the interviews. What are the five key questions for judging whether an acquisition has been successful? Listening: Making acquisitions

32. 3 Listening -D • Keys: • Did the things that you expected to happen actually happen? • Do you have a stronger competitive position as a result of the acquisition? • Did you get the cost savings that you expected? • Did the sales of the company continue as you had projected ? • Did you pay a sensible price? Listening: Making acquisitions

33. 13 Takeovers and mergers MARKET LEADER 4 Reading Why mergers fail

34. Language points of the text

35. merger • noun. the joining together of two or more companies or organizations to form one larger one • There has been a lot of talk about a merger with another leading bank. • There is a merger between two of Britain's biggest trades unions.

36. in haste • quickly or in a hurry: • They left in haste, without even saying goodbye. • Don't act in haste or be hot-headed.

37. apace • adv. happening quickly: • Expansion of the company has continued apace.

38. collapse (L.1) • noun. a sudden failure in the way sth. works, so that it cannot continue: • His business was in danger of collapse. • I thought that without me the whole project would collapse.

39. implementation (L. 45) • noun. the act of taking action or making changes that you have officially decided should happen • the implementation of the peace plan • Very little has been achieved in the implementation of the peace agreement signed last January.

40. take account of sth. (L. 48) • to consider or include particular facts or details when making a decision or judgment about sth.: • These figures do not take account of changes in the rate of inflation. • A valuation of a smaller company must take account of its potential as a takeover target.

41. compatible (L. 75) • adj. able to exist or be used together without causing problems • Stephen's political views often weren't compatible with her own. • Compatible couples generally share the same values and have similar lifestyles and goals.

42. be couched in sth (L. 77) • to be expressed in a particular way: • The offer was couched in legal jargon. • The Declaration of Rights itself was couched in the language of political conservatism.

43. complementary (L. 80) • adj. complementary things go well together, although they are usually different: • Bain and McCaskill have complementary skills -- she is creative while he is highly organized. • These two sides were not only complementary, they were in conflict.

44. metaphor (L. 90) • noun. a way of describing sth. by referring to it as sth. different and suggesting that it has similar qualities to that thing • That is not a metaphor, but the plain truth. • She was a caged bird, to use her own metaphor, that had to break free.

45. tie the knot (L. 93) • to get married • They tied the knot in a romantic ceremony on the banks of a fjord (海湾, 峡湾). • Lots of big companies tied the knot, while some huge ones split up.

46. unconsummated (L. 98) • adj. not successful • The merger and acquisition is unconsummated. • The plan has been proved to be unconsummated.

47. replicate (L. 149) • verb. if you replicate someone's work, a scientific study etc, you do it again, or try to get the same result again: • There is a need for further research to replicate these findings. • Other scientists were unable to replicate the experiment.

48. odds (L. 160) • noun. difficulties which make a good result seem very unlikely • The odds are stacked against the young birds, especially in winter. • Their job was to hold on despite impossible odds, in order to give the rest of the army time to strike.

49. 4 Look at the exercises Reading: Why mergers fail

50. MARKET LEADER 4 4 Reading -A • Before you read the article, discuss these questions. 1. Whose shareholders benefit more in a takeover: those of the acquiring company or those of the one that is being acquired? 2. What is corporate culture? How might it affect the success or failure of a merger? Reading: Why mergers fail