Lekcja 17: To tie the knot or not?

Mergers and Acquisitions (M&A) are important actions taken by companies. They may decide on the existence or disappearance of a company from the corporate world.

Not surprisingly, these actions often make headline news as deals can be worth hundreds of millions, or even billions, of dollars. A merger means that two previously separate organizations are combined into a third new entity. An acquisition involves the purchase of one organization by the new parent firm. M&A activity is characterized in the academic literature as an “organizational marriage”. That is why we use typical marriage expressions like ‘tying the knot’.

The reasoning behind M&A is that two companies together are more valuable than two separate companies. When times become tough and companies realize they cannot survive on their own this deal proves to be particularly alluring. Strong companies that decide to buy other companies will create a more competitive, cost-efficient company. Additionally, companies will come together hoping to gain a greater market share or to achieve greater efficiency.

It’s no secret however that not all mergers are successful due to the wrong reasoning. Sometimes mergers are driven by fear. The management team feels they have no choice and must acquire a rival before being acquired. The idea is that only big players will survive a more competitive world. Globalization, new technology, and a fast-changing economy are powerful incentives for M&A to take place. What can also hamper the success are the differences in corporate cultures of the companies. What is acceptable in one company may be banned in the other creating resentment and shrinking productivity.

Nevertheless M&A can boost company growth and profits. However, what is more important is that they can produce substantial, long-term shareholder returns.

VOCABULARY

Word-of-the-week

Acquire – to obtain something

Derivatives:

acquirer (noun) – person acquiring

acquisition (noun) – thing being acquired or the act of acquiring

acquisitive (adjective) – eager to posses and collect things

Examples:

1. The company was acquired by a famous American retailer.

2. The acquirer was a Polish company trying to expand into the Asian market.

3. The acquisition took place two weeks before the crash on the stock market.

4. In today’s world we live in an acquisitive society that wants to possess more and more.

Glossary:

entity – something that exists on its own, having its own independent existence

purchase – to buy something

alluring - attractive or exciting

incentives – something which encourages a person to do something

banned – to forbid something officially

resentment – to be angry about and to dislike being forced to accept something

shrinking – to become smaller

shareholder – a person who owns some of the equal parts into which the ownership of a company is divided

practice makes perfect

Complete the gaps with words from the text

1. Tickets to the Rolling Stone concert can only be ………………….. one month in advance.

2. Smoking will be …………….. in all public places next month.

3. Sleeping in a five-star hotel was very ………………, that’s why I decided to buy the holiday.

4. I put my woolen sweater in the washing machine and it ……………. in the wash.

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