UNIT 9: MERGERS AND ACQUISITIONS

I. Reading
1. Understanding the main points
Read the text and match the titles to the paragraphs
a. Disadvantages of takeovers
b. Raiders and assets-stripping
c. Raids and bids
d. The ‘make-or-buy’ decision
e. The role of banks
1. d 2. e 3. b 4. a 5. c
1. Understanding details
Find words or phrases in the text that mean the following:

1 Adding new and different products or services Diversify

2 A company’s sales expressed as a percentage Stock
of the total sales in a market
3 Reductions in costs resulting from increased Economies of scale
production
4 Money paid to investment banks for work done Fee
5 All the individuals or organizations that Customer
regularly or occasionally purchase goods or
services from a company.
6 Best, perfect or idea (adjective) Optimum
7 Combined production or productivity that is Synergy
greater than the sum of the separate parts
8 People or companies that try to buy and sell Raider
other companies to make a profit
9 Large corporation or groups of companies Conglomerate
offering a number of different products or
services
10 Buying a company in order to sell its most Asset-stripping
valuable assets at a profit

II. Exercises
Exercise 1:Reading comprehension
Read the first two paragraphs of the article. According to the Consultancy
KPMG’s research about mergers:
a) How many are successful?
- 17% are successful.
b) What effect do they have on the value of a company?
- It reduces the share’s price enormously.
c) What are two key reasons for their failure?
- Over-optimism and management egos are the 2 main reasons.
Read the rest of the article. Who believes:
d) That mergers fail because of:
- The way the two companies are combined? ->John Kelly believes that mergers fail
because of the way 2 companies are combined.
- Differences in culture? ->John Thorp believes that mergers fail because of cultural
differences.
- Unrealistic expectations about the future success of the new company? ->James
Montier believes that mergers fail due to unrealistic expectation about the future
success of the new company.
e) That companies merger essentially:
- From fear of competition? ->John Kelly believes that companies merge essentially
from fear of competition.
- To ensure their survival in a global market place? ->John Thorp believes that
companies merge essentially to ensure their survival in a global marketplace.
Read the text again and answer the questions:
f) Why is the writer so surprised at the money spent on mergers?
- Because so many evidence has shown the failure of mergers yet lots of money is
still spent on it.
g) What motivated Daimler-Benz to merge with Chrysler?
- The merger was to survive and sell more products.
h) What were the direct consequences of the culture clash?
- The clash led to misunderstanding among leaders and many have quit because
confident financial targets were not met.
i) How important are individual personalities in mergers?
-
j) Why has the BP Amoco merger succeed when others have failed?
- Because it merge with businesses that can produce ongoing cost efficiencies
instead of one-off savings.
Exercise 2:Vocabulary
 The writer uses idiomatic language throughout the text.
1. Find examples of words and expressions which are related to marriage. Why do
you think the writer uses this metaphor?
- Examples: marriage, altar, doom, nuptial,…
2. Take a word from box A and combine it with word from box B to form
collocations.
A B
cost efficiency
share price
job cuts
stock market
investment strategy
financial target
share options
takeover bid