Раскрытые топики к ГОСу по Английскому / topic+18

Topic 18. What is the difference between a takeover and merger? Dwell upon the procedure of takeovers and mergers.

There is a difference between takeover and merger. A takeover is when one company buys more than 50% of the shares in another from its existing shareholders and thereby obtains a controlling interest. A merger is when two companies combine as equals, by mutual agreement.

Acquiring another business lets owners:

• Establish a base. Obtain a going concern in a particular location.

• Establish a niche. Bring in more business of a certain type.

• Increase productivity and profitability.

• Expand geographic coverage. Obtain entry into adjacent market areas.

• Increase prestige. Drive company value up.

Merging offers the above advantages and additional ones, such as:

• Succession planning. A way to secure retirement through new ownership.

• Reduced work level. A way to share responsibility among more people.

• Security if a larger organization. A way to cope with larger competitors.

The procedure of takeover as well as the procedure of merger has following steps:

1). Gathering the target’s information: business history, projected and historical financial data, ownership records, information on products and services, sales and marketing data, and supplementary information on banking, legal and contractual relationships.

2). After gathering, verifying and analyzing data the report is prepared. It includes the assumptions and methodology that underlie their conclusions. Based on historical data and projections for the next three to five years, each company determines how much its party will contribute to any resulting enterprise.

3). The next step is to determine the value. In a merger, the parties negotiate how relative value will translate into the amount of ownership each party will have in the new company. In an acquisition, the parties negotiate how the relative value contributed to the new enterprise will translate into the purchase price. Factors, such as market demand or unique assets, will influence the final price.

Although a merger involves a combination of two or more entities, they are rarely equal participants. Sometimes a merger is a really an acquisition financed by common stock. Mergers are typically more expensive than acquisitions, with the parties incurring higher legal costs. But there are many reasons for parties to decide to merge rather than treat the combination as an acquisition such as:

• A merger doesn’t require cash.

• A merger may be accomplished tax-free for both parties.

• A merger lets the target realize the appreciation potential of the merged entity.

• A merger allows to shareholders of smaller entities to own a smaller piece of a larger pie, increasing their overall net worth.

Anyway, no matter whether it is a merger or takeover, there should be a clear, well-through-out, written strategic plan.