Unit 16. Corporate alliances and acquisitions

As business and the world economy become increasingly competitive, more and more companies have to strengthen their operations to remain profitable. Companies can go about this in a number of ways, including the following:

Joint venture: Two or more companies agree to collaborate and jointly invest in a separate business project. This type of deal allows the partners to combine their strengths in one specific area.

Merger: Two companies, often in the same industry, come together to form one company. Companies merge for many reasons, for example, to increase market share and cut costs in certain areas, such as research and development.

Acquisition or takeover: One company accumulates enough of another company's shares to take over control and ownership.

Corporate egos cause problems but they seem to be inevitable in a business culture that prizes drive, determination and leadership above all. To climb to the top of the corporate ladder one should have the strength of personality and the ability to outman oeuvre others. This is a fundamental prerequisite ofthe success. So with a power-hungry alpha male at the top of each company, it is not surprising that every time a mega-merger is announced, there's a high probability of a boardroom bust-up.

The spectacular collapse ofthe supposed alliance of drug giants Glaxo Welcome and Smith Kline Beecham is a UNIT book example.

There was a clear business iogic to the union of the two Pharmaceuticals giants. The deal gave the companies a drugs research and development budget more than twice the size of their closest rivals, Novartis and Merck, and the combination of their complementary research technologies could have left them streets ahead of the competition; cost-cutting alone could have saved $1 bn. But because these two great beasts of the jungle chose to throw sand in each other's faces, the deal is off, at least for now.

Nicholas Bates, head of Human Resources Management at the European Business School, says many senior businessmen actually go off the top of the scale on personality tests. Nevertheless these are precisely the sorts of personalities that companies want because they can transform a business; the problems only appear when they have to get together with peers in their organizations who don't share their views. Then clashes are inevitable.

Europe's most spectacular and public bust-up was between automotive giants Volvo and. Renault. In September 1993 Volvo and Renault announced they were to tie the knot, with Volvo holding a minority 35% stake. However, three months later Volvo shareholders and senior management rejected the marriage plans because of concerns that the deal undervalued Volvo.

Simmering resentment over chairman PehrGyllenhammar's dictatorial management style at Volvo added spice to the management revolt. The divorce is reputed to have cost Volvo several hundred million dollars and forced the resignation of Gyllenhammar after more than two decades in the driving seat.

Egos play such a large role when two giant corporations come together that it is hard to make them work unless one personality is prepared to take a back seat or step down. The $26 bn marriage between Swiss giants Ciba and Sandoz to form Novartis in 1996 is often held up as a text book example of how mega-mergers can work. It is successful, but much of that success is dependent on the fact that key personnel were ready for retirement, or were prepared to relinquish old roles in favor of new opportunities in other scenarios.

Compromise is essential if mergers between two powerful corporations are to work to the advantage of both parties and their shareholders. Otherwise friendly discussions break down and can easily turn into all-out war. In the corporatejungle, the question is now whetherthe imperatives of shareholders can control the egos of managers, to force through deals that deliver them the financial return they expect. This is where independent directors ought to play a part, although they rarely do.

The European

EXERCISES

Exercise 1. Match the word with its definition.

To outman oeuvre, to relinquish, verging on, compromise, an ego, simmering, streets ahead of.

1. a person's opinion about him / herself

2. much better than

3. to gain an advantage by having a better plan

4. almost, nearly

5. just hidden below the surface

6. to let s.b. else take

7. agreeing, while accepting some things you don't like

Exercise 2. Read the text again and answer the questions.

1. According to the author, why should Glaxo Welcome and Smith Kline Beecham have gone ahead with their alliance?

2. Why didn't the deal go through?

3. What does Nicholas Bates say about the personalities of many senior businessmen?

4. What reason does the author give for the success of the Ciba- Sandoz merger?

5. What according to the author makes a successful merger?

Exercise 3. Choose the best definition for the underlined word in the sentences.

1 The parallels between the behavior of corporate executives and that of great apes are uncanny.

a. similarities b. differences c. distinctions

2 The spectacular collapse of the supposed alliance of drug giants Glaxo Welcome and Smith Kline Beecham is a text book example.

a. unusual b. interesting c. perfect

3 The deal gave the companies a drugs research and development budget more than twice the size of their closest rivals.

a. competitors b. partners c. friends

4 Corporate egos cause problems but they seem to be inevitable in a business culture that prizes drive, determination and leadership above all.

a. unavoidable b. impossible c. likely

5 Having the strength of personality and the ability to outman oeuvre others is a fundamental prerequisite to climb to the top ofthe corporate ladder.

a. step b. problem c. requirement

6 The problems only appear when they have to get together with peers in their organizations who don't share their views.

a people who hold higher positions

b people who hold lower positions

с people who hold similar positions

7 Then clashes are inevitable.

a. solutions

b. strong differences of opinion

c. long discussions

8 In the corporate jungle, the question is now whether the imperatives of shareholders can control the egos of managers.

a. urgent demands

b. instructions

c. strong personalities

Exercise 4. Expressions normally associated with marriage are often used to describe mergers. Read the text again and find three examples.

Exercise 5. Find the following idioms in the text. In. pairs, discuss what they mean.

1. to throw sand in each other's faces

2. to climb to the top of the corporate ladder

3. a boardroom bust-up

4. in the driving seat

Exercise 6. Insert the correct word.

administration, commerce, corporate, involve, merge, white-collar, prosper, takeover, fail, continue

a) When a firm begins to do poorly on the stock market, plans are often made to change it's... structure.

b) The board of directors...to inform the stockholders of the risks of investing in South Africa.

c) How many people are... in advertising of the new product?

d) Despite some problems the company expects to continue to... in the nearest future.

e) New York has always been a centre of....

f) After their annual growth rate had fallen they were... by a major competitor.

g) Mr Brown is too old to... in his present position.

h) In order to deal with additional paper-work we need to expand the... staff by 10 people.

i) The management of contemporary corporations requires people who know how to....

j) The large companies which have been successful in the past have normally... with their closest competitors.

Exercise 7. Make sentences with the words.

a. this delay I once again / has caused /1 regret / any inconvenience

b. with them / our understanding ofthe issues /1 will get in touch I so that we can improve

c. your attending/ to this matter /1 would appreciate / at your earliest convenience

d. an alternate suggestion / if I we would be pleased / you have / to consider it

e. to you / of some assistance / this information /1 hope / will be

f. this explanation /1 trust / will answer / you raised / the questions

g. I would appreciate / by the end / hearing from you / of February

h. any further information / please do not hesitate / if you need / to contact me

i. the results / we will send you / as soon as possible / of the competition

j. receiving /1 would appreciate / on the proposed form / before January

1 / your comments

Exercise 8. Read the following extracts from the financial press. In pairs, decide whether each one refers to (a) a joint venture, (b) a merger or (c) an acquisition.

1. Walt Disney Co., Heart Corp and Peterson Publishing Co. are discussing a deal that would combine their considerable influence in the publishing world to launch a weekly magazine to compete with 'Sports Illustrated' next year.

2. General Motors is to start building its Chevrolet Blazer, a sports utility venicle, in the factories of Elabuga Avtomobilny Zavod (EIAZ) in Tatarstan, an autonomous part of Russia. This business project will be owned by EIAZ and GM, which plans to invest as much as $250 m in the plant.

3. Poland may call off talks on the sale of newsstand chain Ruch to France's Hachette distribution service if it fails to make a firm financial offer soon.

4. Bank Inicjatyw Gospodanczych (BIG) and Gdanski are planning to work together on a new deal. They will form one new bigger and stronger bank and together they will control 4% of Polish banking assets.

5. Just as Daewoo Electronics chairman Bae Soon-Hun thought he had agreed a deal to buy Thomson Multimedia, the consumer electronics arm of Thomson, he heard that it had refused his offer.

Exercise 9. In the following examples from the text, are the underlined verbs:

A. transitive (followed by an object)?

B. intransitive (not followed by an object)?

... unless one personality is prepared to take a back seat or step down

... otherwise friendly discussions break down...

Exercise 10. Replace the underlined words with a verb from A and a particle from B, in the correct form.

 

A		В
catch	get	up(x2)	ahead
stand	go (x2)	on (x2)	by
speak	look	down	under
end

 

a. The company had hoped that the new sportswear designs would be a success but in fact they never really became popular.

b. They finished by having to abandon the idea altogether.

c. Following the recent takeover of his company the chairman has announced his intention to resign.

d. I'm afraid I can't hear what you are saying. Could you talk louder please?

e. He's new here, but he seems to be making progress.

f. Many businesses fail in their first year.

g. We need to think of the future and decide where we want to be in five years.

h. It's a pity we let that opportunity pass; we need more orders like that.

Exercise 11. Which characteristics of senior business people do you think are essential, useful, not useful and dangerous? In pairs, discuss your answers.

Exercise 12. Revision of modal verbs of obligation. Look at the following examples from the text.

To climb to the top of the corporate ladder one should have the strength of personality and the ability to outman oeuvre others.

This is where independent directors ought to play a part.

In both these examples a modal verb is used to express mild obligation or advice. What do the following verbs express?

1. have to

2. should / shouldn't

3. ought to

4. don't have to

5. don't need to

6. needn't

7. must / mustn't

8. need to

a. obligation or necessity

b. advice

c. absence of obligation or necessity

Exercise 13. Seven warnings signs of a danger ego out of control. What does the person need to change / not change? Write eight sentences using modal verbs of obligation.

Example: He should be competitive in some aspects of his life but he has to stop being competitive about drinking.

1. Dominates conversations, commandeers meetings, interrupts and finishes off sentences of others. Competitive in all aspects of life, not only business but tennis, squash or drinking.

2. Bold, doesn't worry about going into new situations and meeting new people.

3. Has a high opinion of himself and his abilities and he always thinks he is right.

4. Loves pressure. He likes tight deadlines, is impatient to get ahead and does several things at once.

5. Must be the centre of attention at meetings, parties, social gatherings, and can't do without attention or flattery.

6. Loves power and the trappings. Couldn't bear to be without a chauffeur-driven car, paneled office, secretaries and trips on Concorde.

7. Has abnormal energy levels, is always on the go, needs little sleep, and is constantly restless.

 

Список используемой литературы

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8. «Market Leader», Longman.