V. Writing.

5.1. Write out of the article sentences representing the author's point of view on

a) European companies trying to maintain their competitiveness;

b) European companies going global. Comment on these ideas.

5.2. Find another example of a big European company going global. Consider its experience.

5.3. Make a detailed analysis of the strategy both companies apply in low-cost countries, such as China, for example.

5.4. Make a survey of the Chinese market as a favourable destination of European investment.

Unit 4.

I. Pre-reading.

1.1. Before you read the article below, say what you know about the process of mergers and acquisitions in Europe.

1.2. Read the following article and then

a) say if these statements are true or false, give reasons for your answers:

a) Last year, there were more mergers and acquisitions in Europe than in America.

b) Britain, unlike continental Europe, welcomes foreign takeovers of is native companies.

c) The Spanish economy is doing surprisingly well thanks to a large number of multinational companies operating in its territory.

d) Membership of the euro helps Spain to "conquer" the European market.

e) Spanish capitalism forms a very attractive environment for foreign business.

b) make a gist of the article.

Buy, buy, buy

Europe's businesses are changing hands at a record rate

THE past two years have seen displays of the best and the worst in European business. There has been a wave of cross-border mergers and acquisitions, reflecting a healthy market for corporate control, robust profits and plenty of cheap credit. It also shows the single European market becoming more of a reality for the service sector. Utilities such as privatised energy companies are at last getting big enough to provide better service and become more profitable. More cross-border mergers mean more competition, to the benefit of consumers.

Mergers and acquisitions in Europe last year were worth $1.59 trillion, overtaking the value of deals in America (at $1.54 trillion), according to Dealogic, a data firm (see map for regional breakdown). Of the top ten deals launched worldwide in 2006 five were European, and of those two were cross-border—e.ON of Germany bidding for Endesa of Spain and Dutch-based Mittal for Arcelor of Luxembourg.

A survey by Morgan Stanley of European finance directors shows that they see mergers and acquisitions as their top priority for this year, so the recent wave of mergers—the biggest Europe has ever seen—is likely to continue through 2007. Last year Britain took the largest slice of Europe's M&A cake, with the value of deals topping $367 billion, ahead of Spain, with $190 billlion, and France, with $174 billion. Since 2004, when the current wave started to build up, the total value of European deals has almost tripled.

But there has also been a surge of economic nationalism as French and Spanish politicians have blocked takeovers of native companies by foreigners. There is some irony in the fact that Britain, which is more sceptical about European integration than most, is the most willing to permit foreign takeovers, thus promoting the integration of the single market on the ground.

France and Spain snap up foreign companies, especially British ones, but when anyone tries to do the same on their home territory their politicians put up the barriers. Italy likes to buy abroad too but closes the shutters as soon as the French or Spanish come looking. Germany, since the high-profile hostile takeover of Mannesmann by Vodafone, is coming round to the idea of foreign takeovers, just so long as the target is not Volkswagen. Recent hostility to cross-border mergers has attracted much negative comment. Paradoxically, though, it may be a reaction to the large amount of M&A that has in fact gone on unhindered.

With full liberalisation of Europe's energy market looming later this year, electricity and gas companies are seeking to become stronger before facing more competition. By contrast, consolidation in banking and telecoms has been relatively slow. There are plainly too many banks that are too weak and small, but national governments are loth to see foreigners moving in on their banks or their telecoms companies. Moreover, the French and Italian governments often retain important stakes in privatised utilities, so the scope for obstruction is vast.

The governor of the Bank of Italy resigned in 2005 after being accused of acting improperly to protect Italian banks from takeover approaches by rivals in the Netherlands and Spain. The Italian government has changed the rules about motorway concessions to prevent a friendly merger between Autostrade and Abertis, so that deal is off. The Spanish government has been doing its best to frustrate the bid for Endesa from Germany's e.ON, trying instead to promote an internal Spanish merger between Endesa and Gas Natural, a smaller local energy company.

But the most assiduous practitioners of “economic patriotism” are the French, with their list of 11 protected sectors designed to discourage predators from even considering a bid. It emerged amid rumours about a bid by Pepsico for Danone, a food group famous for its yogurt products. Again, it took only the hint of a bid for the Suez conglomerate from Italy's privatised electricity company, Enel, for Dominique de Villepin, France's prime minister, to drop his opposition to a long-planned merger between Suez and Gaz de France. Union opposition has since held up completion of the merger.