 |
Read and translate the text “Mergers and acquisitions”.
|
|
|
|
Value creation and synergy
The purpose of any commercial company is to create value for its shareholders. For example, when two powerful insurance companies Norwich Union and CGU merged, they re-branded, adopting the name Aviva plc and the slogan: 'One Aviva, twice the value'. This added value, the difference between the value of the combined company and the sum of the original values of the stand-alone companies, is known as synergy. The main aim of mergers and acquisitions (M&As) is to add shareholder value through synergies which are measurable in terms of cost savings or revenue generation.
In mergers, two companies create a new entity and issue new stock to their shareholders, whereas in an acquisition one company ceases to exist and is integrated into the acquiring company or held as a subsidiary. There are various ways for companies to combine. Competitors in a market where there is overcapacity can create synergy through horizontal integration. This allows economies of scale, such as larger orders to suppliers, and cost cutting, such as closing plants. Companies may also cooperate through joint ventures and strategic alliances, agreements that do not require a change in ownership.
Companies with an existing business relationship, such as suppliers and producers, can increase value through vertical integration: for example, a car manufacturer buying a component firm or a chain of car showrooms. In market-extension mergers, companies selling the same products in different markets can merge to access more consumers, while those with related products in the same market can join in product-extension mergers. In conglomeration, companies with no common business area form a diversified group to reduce risk.
Merger waves are periods of increased acquisition activity, often associated with a boom in the value of the stock market in a country or business sector. The recent wave of crossborder M&As may be part of a strategy for overseas market penetration, such as UK-based Vodafone's takeover of Ghana Telecom.
Implementing M&As and post-merger integration
M&As have economic effects, so many countries have competition or anti-trust laws to prevent a small number of companies from dominating the market and engaging in anti-competitive practices. Managers and their professional advisors must exercise due diligence, investigating all the risks and legal issues involved. They will check the financial health and prospects of the target business to be able to value it. In an acquisition, the buyer will usually pay a premium above the market value of the company in order to gain control representing some of the potential synergies from the deal.
After a merger or acquisition, company operations and practices need to be re-structured. Post-merger integration concerns not only practical aspects like pricing strategies and integrating IT systems but also retention of key people. In the knowledge economy, the 'return on talent' is an important part of value creation. Effective post-merger strategies aim for an outcome where the 'best of both' is represented, or a transformational approach, in which the two merging companies change into something much stronger than either of them had been before — the 'best of both plus'.
|
|
|
Complete the notes on examples of how synergy is created by adding the names of the types of mergers, acquisitions or company collaboration the examples represent. Use the words from the first part of the text.
1....... integration: in 2002, budget airline EasyJet took over Go! because of overcapacity in the holiday industry.
2....... -extension merger: in 1998, Chrysler Corp. merged with Daimler Benz to form DaimlerChrysler, giving Chrysler an opportunity to reach more European markets and Daimler Benz greater presence in North America.
3....... integration: Walt Disney Corporation paid a premium to acquire Pixar Animation Studios in 2006 when there was a boom in the market for animated films.
4........ (or...... alliance): Sony Corporation and Ericsson set up a separate company, with 50:50 investment to develop and manufacture mobile phones, combining Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector.
5.......: during the 1980s, General Electric also moved into financing and financial services, acquiring subsidiaries in these fields, which in 2005 accounted for about 45% of the company's net earnings.
Paste your answers accordingly
Complete the article about a key player in the merger implementation process, using words from the text.
The Integration Manager
Once the target company has been identified it is important that an executive is put in place to take responsibility for the process up to the ….... integration stage. As well as overseeing that operations are re-.....and the new company re-....... where necessary, such a manager needs to ensure due...... is practised and that the newly formed company complies with the..... laws of the country to avoid any....... practices. A successful integration manager would employ a..... approach, to create true......, and making sure the 'return on...... was guaranteed by encouraging and rewarding key workers so that the new company would not lose their knowledge and experience.
ВАРИАНТ 2
I
1. Read the text “Inflation”.
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money - a loss of real value in the internal medium of exchange and unit of account in the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.
Effects of inflation on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation may discourage investment and savings, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring central banks can adjust nominal interest rates (intended to mitigate recessions), and encouraging investment in non-monetary capital projects.
|
|
|
Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to growth in the money supply. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.
Today, most mainstream economists favor a low steady rate of inflation. Low (as opposed to zero or negative) inflation may reduce the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduce the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control the size of the money supply through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.
The connection between inflation and unemployment has been drawn since the emergence of large scale unemployment in the 19th century, and connections continue to be drawn today. In Marxian economics, the unemployed serve as a reserve army of labour, which restrain wage inflation.
|
|
|
