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

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.

Security (finance)...

... a financial investment such as a bond, a share/stock or a d _ _ _ v _ _ _ v _.

Security (finance)...

... a financial investment such as a bond, a share/stock or a d e r i v a t i v e.

Derivatives

MK, U 18, p 92

• 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

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

MK, p 92 Vocabulary

1F 2A 3E 4D 5C 6B 7H 8G

Financing capital: discuss opportunities & threats

• government subsidies

• bank loans

• issuing bonds

• issuing shares acquisitions: buyouts and takeovers

Why?

→ MK, p 105

to reinforce your position to reduce competitionto rationalize productionto diversify products/marketsto gain access to new technology...

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

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

Pg 2

• Explain the difference between a raid and a takeover bid

Advantages Disadvantages

A raid

A takeover bid

● Explain the difference between a friendly and a hostile bid

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

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?

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

TYPES

1. ACQUISITION / TAKEOVER

2. FRIENDLY TAKEOVER

3. HOSTILE TAKEOVER

4. MERGER

5. JOINT VENTURE

6. LEVERAGED BUYOUT

7. CORPORATE RAID

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 

JOINT VENTURE

MERGER

ACQUISITION / 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.

FRIENDLY TAKEOVER

HOSTILE TAKEOVER

LEVERAGED BUYOUT

• 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

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 lossesG conglomerates may become unmanageableI traditionally, the best companies have beaten their

competitors rather than buying them

What is missing?

• ~ between• ~ talks• ~ proposal• ~ agreement

• conglomerate ~• defensive ~

• horizontal ~• vertical ~

What is missing? MERGER

• a merger between 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

What is missing?

friendly ~hostile/unfriendly ~leveraged ~creeping ~~ battle~ bid What is missing?

leveraged ~ (LBO)employee/staff ~ management ~ (MBO)

What is missing? TAKEOVER

friendly takeoverhostile/unfriendly takeoverleveraged takeovercreeping takeovertakeover battletakeover bid What is missing? BUYOUT

leveraged buyout (LBO)employee/staff buyoutmanagement buyout (MBO)

Review: M & A

Mergers and acquisitions

Success Money Investments in R&D Acquisition of other companies

(t__________, b_______)Merger - integration:Comp. in unr___ed fields ConglomeratesCompetitors = horizontal m/i ver Distributors = forward m/i LBO ti Suppliers = backward m/ical stripped of assets

& split up

a_________financedby debt

afinancedby debt

akeovers uyouts

elat

cquisitions

Mergers and acquisitions

Success Money Investments in R&D Acquisition of other companies

(takeovers, buyouts)Merger - integration:Comp. in unrelated fields ConglomeratesCompetitors = horizontal m/i ver Distributors = forward m/i LBOti Suppliers = backward m/ical stripped of assets

& split up

acquisitionsfinanced by debt