Unit 9 business integration tendencies

Learning objectives After studying this unit you should be able to: discuss different types of business integration structurise an acquisition programme evaluate the challenges and the benefits of a possible merger make a SWOT analysis write about different aspects of business integration

Vocabulary development

Investigate the idea of business integration

1. Complete the following chart. Use dictionaries if necessary.

Part of Speech	Words	Meaning	Translation
Verb	...	to make up, combine, or complete  a whole or a larger unit	…
Noun	integration	…	интеграция, объединение
Person	...	…	кто-л. или что-л., производящее интеграцию
Adjective	… ... integrating	serving or intending to unify separate units with various parts or aspects linked or coordinated …	интегративный интегральный, интегрированный (о системе) интегрирующий

2. Translate the sentences from Englisn into Russian.

1. The main responsibility of an integrating manager is to coordinate the operation of different departments which participate in different programmes and projects.

2. Some economists have commented on the expansion large, vertically integrated corporations.

3. It should be noted that business integration requires the efforts of highly-qualified management.

4. The shareholders of the integrating entities mutually share the risks and rewards of the new entity.

5. The agreement initiated the integration of individual companies into trading blocs.

6. The process of companies’ integration may cause financial difficulties.

3. Make your own sentences using the highlighted patterns in task 2.

Verbs to speak out

1. Word-building: What are nouns related to the following verbs?

Verb			Noun
integrate
merge
take over
acquire
target
buy out
	demerge
divest
combine
amalgamate

2. Translate the sentences from Englisn into Russian. Pay special attention to the underlined words.

1. BP is divesting assets worth $30 bn. to cover the cost of the oil spill in the Gulf of Mexico.

2. There is a strong incentive to dispose of unneeded assets and to acquire new ones.

3. Let us combine our two firms against our competitors.

4. The company was demerged into two separate companies.

5. The acquisition was targeted at a rapidly growing company.

6. Recent years have seen a significant increase in the amount of companies that merge under the pressure of poor economic conditions.

7. In the 1960s small companies were amalgamated into larger enterprises.

8. In 2013 the management team decided to buy out the business.

3. Complete the sentences using the verbs in an appropriate form. Translate the sentences into Russian.

reduce assume take over persuade invest negotiate

achieve provide worsen manage enter

1. One of the possibilities … capital is buying or acquiring another company with successful products.

2. A merger occurs when one firm … all the liabilities of another one.

3. The most significant reasons … other companies are to maximize shareholder value and … competition in the market.

4. Hidden liabilities of a target entity can … the financial situation of an acquirer.

5. Conglomerates may become unmanageable and fail … synergy.

6. Executives from the respective companies … to ensure a successful integration of all parts.

7. Multinationals … new jobs, goods and services around the world and spread technological advances.

8. It can be difficult …. companies in unrelated industries.

9. A target company might be attractive because it allows the acquiring company … a new market.

10. The acquirer tries … the shareholders of the target company that the present management should be ousted in favour of a new list of directors preferable to the acquirer.

4. Make up all possible word combinations which refer to the business integration.

e.g. persuade company’s management / shareholders

achieve reduce persuade dismiss take over enter invest in acquire decrease launch

successful companies R&D a smaller company a badly-managed entity competition a premium price company’s management market value a raid synergy unrelated businesses a new market publicly traded shares shareholders value average costs of production shareholders a target company a subsidiary a purchase price an under-priced corporation cash reserves assets

5.Make up sentences to illustrate the usage of the word combinations given in 4.

e.g. A conglamerate is a combination of companies operating in unrelated businesses.

Key terminology in use

1. Match the economic terms given in column A with their definitions given in column B. Use a dictionary if needed.

A	B
acquisition	refers to one company (the acquirer) purchasing another (the target) without the formation of a new company
acquiring firm (bidder, predator)	b) a company that is an object of an acquisition
target company (prey)	c) involves amalgamating or joining together with another company into a new single larger firm
merger	d) a firm which purchases a company in an acquisition
horizontal integration	e) a takeover of a company by a group of employees, usually senior managers and directors
vertical integration	f) a takeover that occurs in different forms, e.g. a smaller corporate entity takes over a larger one; a private limited company purchases a public one
conglomerate	g) a strategy whereby a firm sells one or more of its business units
takeover	h) a large business organization with branches in several countries
friendly takeover	i)an attempt to acquire a large proportion of a company's shares by buying through several brokers just as the stock market opens
hostile takeover	j) a transaction designed to divest non-core operating divisions into their own independent operating company
reverse takeover	k) a business composed of several companies, operating in unrelated industries
dawn raid	l) a technique used by group of shareholders to gather enough shareholder proxies to win a corporate vote
proxy fight	m) a situation in which a target company's management and board of directors agree to be acquired by another company
leveraged buyout (LBO)	n) a raid that does not have the consent of the directors of the company whose shares are being acquired
management buyout (MBO)	o) refers to combining of two or more companies that are in the same stage of production
multinational company	p) separation of a company into several separate parts
spin-off / spin-out	q) combining of companies involved in different steps of producing or marketing a product
divestiture	r) a takeover of another company using a large proportion of borrowed money
demerging	s) company expansion through the purchase of other businesses

2.Translate the phrases from Russian into English. The previous tasks can help you. Маkе some sentences using the phrases in English.

e.g. The purpose of the merger was reducing competition.

Осуществлять слияние с другой компанией; инвестировать в слияние компаний; являться объектом поглощения; создать независимую дочернюю компанию; разделить компанию на несколько частей; открытое акционерное общество; закрытое акционерное общество; снизить конкуренцию; находиться на различных стадиях производства; объединяться; совет директоров компании; выкупить акции компании через брокеров; использовать заемные средства; выиграть голосование на собрании акционеров

3. Read the text and translate it into English.