Angličtina s Hospodářskými novinami

Mergers by Margaret O'Keeffe

Pre-reading task

What do you think the words 'knights', 'squires' and 'dawn raids' mean?

Now, read the article and check if your answers are correct.

'Hostile takeovers', 'dawn raids', 'black knights' and 'white squires' . . . this warlike terminology, believe it or not, is the language of business - and in particular the language of take-overs and mergers.

With all this military sounding jargon, it's not surprising that people often see mergers as aggressive. So what are the motives behind mergers, and what do all the terms mean?

Two companies often combine, or merge, because it benefits them both. A small company may have plans to grow, but doesn't have the capital. Joining forces with a larger company can help them realise their plans, while the larger partner benefits by expanding its range of products or services.

But it also happens that smaller companies become the victims of an aggressive attempt by a larger company to take control of their business. Or, in more dramatic terminology, a 'black knight' makes a 'hostile take-over bid'. In these situations the smaller company may decide to merge with another company of their choice, rather than being forced into an aggressive take-over. This preferred company is known as a 'white knight'.

A 'white knight' will be big enough to take control of the smaller company, but on terms they both agree. So what's a 'white squire'? Well, this refers to a company that isn't powerful enough to control the smaller company, but which is able to buy enough of its shares to stop the 'black knight' from making the take-over.

Sometimes, however, it's too late for knights or squires to come to the rescue. If the company planning the take-over is particularly cunning, they may make a 'dawn raid'.

This involves getting to the stock market as soon as it opens in the morning and buying up enough shares in the victim's company to gain control. Before the smaller company knows what's happened, they've been taken over.

So clearly there are many kinds of player involved in a merger. But there are also many kinds of merger - the vertical merger and the horizontal merger, to name but two.

A vertical merger happens when a company takes control of one of its suppliers.

A horizontal merger, on the other hand, is when a company merges with one of its direct competitors. The kind of merger companies choose will depend on their overall business strategies.

So now, if someone tells you that a black knight is planning a dawn raid to make a vertical take-over of their family business, you'll be able to nod wisely and tell them that what they need is to find a white knight.

Exercise 1

Comprehension: Multiple choice. For each question choose the correct answer:

1 A company might choose to merge with a larger
one because . . .
a it wants to trade under a well-known name.
b it needs financial help to grow.
c it can't manage its business efficiently.

2 A company may want to merge with a 'white knight' . . .
a to keep control of its own business.
b to gain control over a competitor.
c to avoid being taken over by another company.

3 A 'white squire' is a company that . . .
a attempts to take over another company but fails.
b is the victim if a 'black knight' stages an aggressive take-over.
c can stop an aggressive take-over from happening.

4 In a 'dawn raid', an aggressive company takes control of another by . . .
a buying up shares on the stock market.
b secretly persuading top managers that it's a good idea.
c suddenly taking control of the company's suppliers.

5 An example of a vertical merger would be . . .
a two rival travel agents merging.
b a construction company merging with its cement supplier.
c a fast food company merging with a publisher.

6 An example of a horizontal merger would be . . .
a two rival travel agents merging.
b a construction company merging with its cement supplier.
c a fast food company merging with a publisher.

Exercise 2

Vocabulary: Matching. Choose the correct words to fill the gaps in the sentences:

black knight / hostile take-over / merger /
white knight / white squire

1 A ........ is when two companies join.

2 Sometimes a merger happens against the wishes of the smaller company - this is called a ........

3 A company making an aggressive take-over is known as a ........

4 A small company may choose to be taken over by a ........

5 A ........ can stop a merger without taking over.

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