1. Unit 9: M&As
1 + 1 = 3 ?

2. Mergers and Acquisitions

3. Reasons for M&As
Discussion
1. Why do people get married?
2. Why do companies merge with/
acquire each other?

4. 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

5. 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

6. 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.

7. Ways to acquire a company
A Raid
or
A Takeover Bid

8. Ways to acquire a company
A Raid
Buying as many of a
company’s stocks as possible
on the stock market.

9. Ways to acquire a company
A takeover Bid
A public offer to a company’s
stockholders to buy their
stocks a a certain price during
a limited period of time.

10. Types of Mergers
Horizontal
Two companies making the same
products combined
Vertical
A company either acquires or merges with
another company in an immediately-
related stage of production and
distribution.
Diversification
A company acquires another company in
an entirely different sphere.

11. Example

12. Example

13. 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

14. 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.

15. Types of Mergers
Further classification/ M&A waves
Period Name Facet
1889 - 1904 First Wave Horizontal mergers
1916 - 1929 Second Wave Vertical mergers
1965 - 1989 Third Wave
Diversified conglomerate
mergers
1992 - 1998 Fourth Wave
Congeneric mergers;
Hostile takeovers;
Corporate Raiding
2000 - Fifth Wave Cross-border mergers

16. 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
 …
 …
 …

17. Problems with Mergers

18. Key terms
 Takeover
 Merger
 Acquisition
 A raid
 Buyout
 LBOs = Leveraged buyouts
 MBO = Management buyouts
 Vertical
 Horizontal
 Horizontal
 Diversification
 Hostile

19. Writing practice
Language Practice
Cause and Effect Expressions
Page 50

20. Speaking practice
Work in groups of 3 or 4 and make a 15-minute
presentation on
 REASONS FOR MERGERS
 PROBLEMS WITH MERGERS
 TYPES OF MERGERS