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