1. ALLIANCES
UNIT 01

2. CAN YOU EXPLAIN THESE WORDS?
●MERGER ● ACQUISITION ● TAKEOVER
● FRIENDLY TAKEOVER ● MULTINATIONAL
● HOSTILE TAKEOVER ● LEVERAGED BUYOUT
● HORIZONTAL INTEGRATION
● VERTICAL INTEGRATION
● BACKWARD INTEGRATION ● CONGLOMERATE
● FORWARD INTEGRATION
● AMALGAMATION ● CORPORATE PARTNERSHIP

3. DO YOU REMEMBER THE WORDS?
two or more companies join together to form a larger company
one company buying another one, or  buying part of another one
getting control of a company by buying over 50% of its shares
a takeover that a company being taken over agrees to
a takeover that a company taken  over does not want and doesn’t  agree to
a person or company buys a company using a loan borrowed against the company’s assets; these assets can  then be sold to pay off the debt
a merger with or the acquisition of one’s suppliers
a merger with or the acquisition of one’s marketing outlets, that is distribution systems

4. joining with firms in other stages of the production or sale of a product
merging with or taking over other firms producing the same type of goods or services
a large company, a corporation or a group of companies which combines unrelated businesses into a single corporate structure, thus marketing a large number of different goods or services
it is formed when two or more companies decide to co-operate on a particular project or mission
an organisation that has offices, factories, activities, etc. in many different countries
the combination of one or more companies into a new entity, in which neither of the combining companies survives as a legal entity.

5. LET’S RECAP...
Successful companies, by definition, make a lot of money, which
sooner or later has to be spent.
HOW DOES A COMPANY INVEST ITS CASH RETURNS?
☺ to invest it all in R&D → innovation and diversification → if successful it leads to even greater cash returns
☺ a company can grow by way of takeovers, mergers and acquisitions (spend money by acquiring other companies, whether suppliers, distributors, competitors or companies in unrelated fields) → if successful, leads to even greater cash returns

6. HOW ARE LARGE CONGLOMERATES SPLIT UP?
HOW DO COMPANIES GROW?
higher revenue through innovation and diversification
more assets
more employees
expansion into foreign markets
mergers and acquisitions
HOW ARE LARGE CONGLOMERATES SPLIT UP?
LEVERAGED BUYOUTS

7. MERGERS ('a merger of equals')
☺occur in a friendly setting  executives from the respective companies participate in a successful combination of all parts:
HORIZONTAL – two merging companies produce similar
product in the same industry
VERTICAL – two firms, each working at different stages in
the production of the same good, combine
CONGLOMERATE – the two firms operate in different industry
☺all the owners of stocks of either company get the same amount of stock in the new combined company
☺can resemble a takeover, but result in a new company name (often combining the names of the original companies) and in new branding

8. ACQUISITIONS (of un-equals, one large buying one small)
can involve a cash and debt combination, or just cash
can involve a combination of cash and stock of the purchasing entity
can involve a purchase of the stock or other equity interests of the target entity
can involve a purchase of all or substantially all of its assets

9. MOTIVES BEHIND MERGERS AND ACQUISITIONS
TO ADD SHAREHOLDER VALUE THROUGH:
ECONOMIES OF SCALE: reducing the number of duplicate
departments → lowering costs relative to the same revenue
→ increasing profits
INCREASED REVENUE/INCREASED MARKET SHARE:
absorbing a major competitor → increasing its power (by
capturing increased market share) to set prices
SYNERGY: better use of complementary resources →
increased market share → greater competitiveness
CROSS SELLING: e.g. a bank buying a stockbroker could then sell its banking products to the stock broker’s customers, while the broker can sign up the bank’s customers for brokerage accounts

10. MERGERS AND ACQUISITIONS

11. MERGERS - PROBLEMS
☹ often, terming the combination a merger rather than acquisition is done purely for POLITICAL OR MARKETING REASONS
☹ net loss of value due to problems caused by INCOMPATIBILITY
(technology, equipment or corporate culture)
☹ inadequate research or CONCEALMENT OF LOSSES OR
LIABILITIES at one of the partners
☹ OVERLAPPING SUBSIDIARIES or redundant staff may continue,
creating INEFFICIENCY
☹ NEW MANAGEMENT may cut too many operations or personnel, losing expertise and disrupting the employee culture
☹ similar to takeovers → if it is not to be considered a failure, it must INCREASE SHAREHOLDER VALUE faster than if
the companies were separate, or prevent the deterioration
of shareholder value more than if the companies were separate

12. HOW DO THESE CARTOONS RELATE TO MERGERS?

13. AND THIS ONE?

14. TAKEOVERS – PROS OR CONS?
WRITE ‘CONS’ OR ‘PROS’ IN GAPS:
______________:
Increase in Sales / Revenues (e.g. Procter & Gamble takeover of Gillette)
Venture into new businesses and markets
Profitability of target company
Increased market share
Eliminating competition
Increased efficiency
Reduced competition and choice for consumers in oligopoly markets
Likelihood of price increases and job cuts
Cultural integration/conflict with new management
Hidden liabilities of target entity

15. WHAT DO YOU KNOW ABOUT SOME RECENT EXAMPLES OF TAKEOVERS AND MERGERS?

16. HOW DOES THIS CARTOON RELATE TO TAKEOVERS?

17. WHAT IS ALLIANCE?
An agreement between two or more companies to work together.
The two companies agreed to form an alliance.
An alliance between AOL and Bertelsman...
Warner-Lambert said it entered an alliance with Boots to promote two new drugs.
STRATEGIC ALLIANCE is an alliance formed as part of a plan with important
aims or to meet a critical business need while remaining independent
organizations.
Singapore Airlines and Lufthansa have announced a strategic alliance with broad implications for competition in the industry.
partners may provide the resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.
the alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts  often involves technology transfer (access to knowledge and expertise), economic specialization, shared expenses and shared risk.

18. CAN YOU IDENTIFY THE COMPANIES AND THEN DECIDE WHICH OF THEM HAVE FORMED STRATEGIC ALLIANCES?

19. LISTENING – SB, p 8
TASK 1
Listen to a consultant talking about alliances and check
your answers.
TASK 2
Listen again and answer the questions.
Why did each of the pairs of companies want to form an alliance?
Which alliances succeeded, and why?
Which alliance failed and why?

20. MERGERS AND ACQUISITIONS – READING – SPRING IN THEIR STEPS – SB, p 9
TASK 1 – Read the text and decide if the author is generally
optimistic or pessimistic about future strategic alliances.
TASK 2 – Read the text and find the answers to the following
questions:
Why did CEOs reduce their involvement in mergers and acqusitions for a time?
Why should CEOs ignore the statistics concerning the success rate of acqusitions?
What should CEOs be aware of when venturing into alliances?

21. MERGERS AND ACQUISITIONS – READING – SPRING IN THEIR STEPS – SB, p 9
TASK 3 – Are the following statements TRUE or FALSE?
In the first paragraph, the author says that CEOs can no longer find targets for mergers and acquisitions.
Studying facts and figures from the recent past won’t necessarily help CEOs to form a successful alliance.
The trend in the 1990s was for companies to build portfolio with diverse investments.
The author suggests that media mergers are always likely to improve share value.
CEOs need above all to find the right company to acquire.
If business planners wish to avoid some of the errors of the 1990s, they should be prudent when taking risks.

22. HOW DO THESE CARTOONS COMMENT ON ALLIANCES?

23. LANGUAGE CHECK - REVIEW OF TENSES
Match the tenses with
their fuctions:
PRESENT SIMPLE
PRESENT CONTINUOUS
PRESENT PERFECT
PAST SIMPLE
PAST PERFECT
FUTURE SIMPLE
regular events and repeated actions
predictions
permanent situations
temporary situations
unspecified past time
timetables and scheduled events
future arrangements
newspaper headlines
things happening now
past action that preceded or caused another past situation
changing situations
changes that affect the present
finished past actions and events
situations that started in the past and continue in the present
definite time periods in the past

24. GRAMMAR BID The company’s annual bid is published every June.
They are manufacturing electrical goods.
The CEO will arrive on Friday.
Miramax is signing deal with Disney.
We are negotiating an alliance with them.
We do not look for partners this year.
We are signing the contract next week.
Are the shareholders informed yet?
We agreed to share technologies.
Costs are rising for several years.
He was the CEO for ten years.
He worked with them for two years.
We merged with them last year.
We were celebrating last night because we have signed the agreement.
By the time of the acquisition, negotiations had taken nearly
a year.
The merger won’t be finalised until next month.

25. WHAT DO YOU THINK ABOUT THESE CULTURAL STEREOTYPES?
‘Heaven is where the police are British, the cooks are French,
the mechanics are German, the lovers are Italian and it’s all
organized by the Swiss.’
‘Hell is where the police are German, the cooks are English, the
mechanics are French, the lovers are Swiss and it’s all organized
by the Italians.’

26. PEOPLE FROM SPECIFIC CULTURES... PEOPLE FROM DIFUSE CULTURES...
seem f_________ and a_________ because they give information freely about themselves from the very first meeting.
seem h________ to know because they don’t tell you much about themselves u________ they know you well.
have friendly relationships with
a lot of people who are not necessarily c_________ or lifetime friends. These relationships may seem s_________ to people from difuse cultures.
have a few close friends, with whom they have a l________-t________ relationship and share many a________ of their private lives.
are happy to talk about personal m_________ with anyone they meet.
don’t like to talk about personal matters in the c_________ of
a business relationship.

27. PEOPLE FROM SPECIFIC CULTURES... PEOPLE FROM DIFUSE CULTURES...
seem friendly and accessible because they give information freely about themselves from the very first meeting.
seem hard to know because they don’t tell you much about themselves unless they know you well.
have friendly relationships with
a lot of people who are not necessarily close or lifetime friends. These relationships may seem superficial to people from difuse cultures.
have a few close friends, with whom they have a long-term relationship and share many aspects of their private lives.
are happy to talk about personal matters with anyone they meet.
don’t like to talk about personal matters in the context of
a business relationship.

28. CULTURAL CONSIDERATIONS
Use of first names and/or titles (other person’s position in
the hierarchy in relation to one’s own – but may also vary
from culture to culture)
Order of introductions (e.g. in Japan, a senior member of
staff would expect to be introduced before a younger/less
senior employee)
Gestures and body language (conventions regarding
handshaking and the exchanging of business cards may
differ from country to country)
Formality of language (may vary according to culture and
situation)
The topics considered to be appropriate for social conversation (e.g. aspects of people’s private lives)

29. BREAKING THE ICE Greetings and introductions
Making small talk (journey, travel, hotel, conference, jobs, company, etc.)
Hospitality (offering a seat, drink, etc.)
Keeping the conversation going (expressing interest, asking follow-up questions, etc.)
Building a positive relationship
Cultural issues (both national culture and company culture)

30. MAKING CONTACT AND BUILDING THE RELATIONSHIP
Say hello and introduce yourself to others.
Use eye contact and smile as your first contact with people.
Make an effort to remember people’s names.
Be articulate and positive about who you are and what you do in a few short sentences.
Ask open questions.
Encourage others to talk more by showing interest.
Respond positively to what they say.
Look for common interests, goals and experiences that you can talk about.
Be tolerant of other people’s beliefs if they differ from yours.

31. MATCH THE FUNCTIONS WITH THE APPROPRIATE PHRASES
I don’t think we’ve_______. I’m...
How_______. I’d love to hear more.
When can we set up a
meeting? Here’s my_______.
I’m...I_______ for Digital France. We_______ products and services in...
Is there _______ I can do?
What did you _______ of...?
I _______ the last presentation too long.
GREETINGS AND INTRODUCTIONS
OPEN QUESTIONS
CLOSED QUESTIONS
MAKING A STATEMENT
USING A QUESTION TAG
SHOWING INTEREST
USING A POLITE PHRASE TO MOVE ON
MAKING CONTACTS
OFFERING HELP

32. MATCH THE FUNCTIONS WITH THE APPROPRIATE PHRASES
The CEO is a brilliant speaker, _______ he?
How are you _______ the conference?
Hello, I’m... Can I _______ you?
Do you _______ much in your job?
You’ll have to _______ me
a moment...
What are the things_______ in your country?
Well, it was nice _______ to you, but I really have to go now.
GREETINGS AND INTRODUCTIONS
OPEN QUESTIONS
CLOSED QUESTIONS
MAKING A STATEMENT
USING A QUESTION TAG
SHOWING INTEREST
USING A POLITE PHRASE TO MOVE ON
MAKING CONTACTS
OFFERING HELP

33. CONVERSATIONAL RESPONSES
Think of a comment that could lead to each of
the following responses:
☺/ ☹ Oh, really?
☺/ ☹ That sounds good.
☺/ ☹ What a pity.
☺/ ☹ That’s true, yes.
☺/ ☹ It is, isn’t it.
☺/ ☹ I’m afraid not.
☺/ ☹ How nice.
☺/ ☹ Not really.

34. SPEAKING TASK – MAKE A SMALL TALK
You’re attending a welcome party on the first evening
of a conference. Start a conversation with at least three
other people. After a few minutes, stop the conversation
and move on to someone new.
Remember to:
Use open questions (those that are more likely to lead to a longer response)
Respond with interest
Use a polite phrase to move on

35. WRITING - MEMO WHAT IS A MEMO?
Common form of business communication between people
working in the same organisation. Usually focuses on only one
specific topic, such as:
GIVING INFORMATION (reporting back the minutes of meetings or summaries of brainstorming sessions)
REQUESTING INFORMATION (asking employees to send in requests for the use of office parking spaces)
GIVING INSTRUCTIONS (telling employees to display identity badges when entering the building)
RECOMMENDING OPTIONS (informing people in the company of the decisions reached on the best way to solve a company dilemma and recommending that these options be implemented)

36. LAYOUT MEMO ________________________________________ DATE TO FROM
SUBJECT
_______________________________________________
INTRODUCTORY PARAGRAPH (introducing the subject matter)
MAIN POINTS (indicated by HEADINGS)
CONCLUDING PARAGRAPH (recommending the action to be taken)
CLOSING (the name or initials of the person sending the memo)

37. REGISTER AND STYLE The opening is more direct and less formal than in
a letter, with no greeting such as Dear...
Starts with the introduction to the main points
Concludes with a request for action
The closing is generally just the initials of
the sender
Less formal than business letters
Neutral tone
Simple language
Short and clear sentences

38. USEFUL PHRASES – GIVING INFORMATION, REQUESTING INFORMATION, GIVING INSTRUCTIONS or RECOMMENDING OPTIONS?
It is recommended that...
It is in the best interests of...
Having considered all the alternatives, I /we suggest...
It is advisable to...
I would like to have...
Could you provide me with...?
If you have any questions, please...
Could you inform us about...?

39. USEFUL PHRASES – GIVING INFORMATION, REQUESTING INFORMATION, GIVING INSTRUCTIONS or RECOMMENDING OPTIONS?
Please read...
We/I kindly request...
Make sure that...
...is permitted only...
You will be happy to hear...
I am/We are delighted to inform you...
I am delighted to be able to announce...
I would like to remind you that...
I have recently been informed...

40. ACCURACY – SPOT THE MISTAKE!
They need more sellers.
One of the best product was...
I am the responsible of Marketing.
Write to the manager and see if he can help.
The manager which looks after
this...
It is the company who makes...
Who’s fault was it?
Neither the invoice or the order
arrived.
There is no change despite of the new machine.
Please cancel our last order, e.g. the one for 20 Cartier watches.
We stock many brands, i.e. Gucci, Dior, etc.
I am interested for the problem.
I’ve been waiting the order since two weeks.
The children are most affected by the advertising.
A document you requested has been sent.
We succeeded to decide...
I would like to drive to the conference instead of to fly.

41. HOMEWORK ASSIGNMENT
vocabulary, grammar and writing – HANDOUTS – have to be filed in a folder (STUDENT’S PORTFOLIO)
optional HW – Dilemma & Decision TASK
ASSIGNMENTS
WRITING - ALLIANCE – FRIEND OR FOE?
Write an argumentative article discussing arguments in favour of and against alliances; include examples from
the Croatian and international corporate world
PRESENTATION OR POSTER – THE MOST SUCCESSFUL ALLIANCES IN THE 21st CENTURY