LEVERAGED BUYOUTS PROFESSIONAL ENGLISH IN USE FOR FINANCE

 

PROFESSIONAL ENGLISH IN USE FOR FINANCE 40. LEVERAGED BUYOUTS

 

A Conglomerates A series of takeovers can result in a parent company controlling a number of subsidiaries: smaller companies that it owns. When the subsidiaries operate in many different business areas, the company is known as a conglomerate. But a large conglomerate can become inefficient. Top executives often leave after hostile takeovers, and too much diversification means the company is no longer concentrating on its core business: its central and most important activity. Takeovers do not always result in synergy; B Raiders If corporate raiders – individuals or companies that want to take over other companies – borrow money to do so, usually bonds, the takeover is called a leveraged buyout or LBO. Leveraged means largely financed by borrowed capital. After the takeover, the raider sells subsidiaries of the company in order to pay back the bondholders.       EXERCISES 40.1 Match the words in the box with the definitions below. Look at A and B opposite to help you. asset-striping core business leveraged market capitalization parent company subsidiaries synergy     1 a company that owns or controls one or more other companies 2 the main activity or a company 3 buying a company in order to sell some of its assets 40.2 Match the two parts of the sentences. Look at A, and B opposite to help you 1 Large conglomerates formed by takeovers 2 If a conglomerate diversifies and doesn’t concentrate on its core business 3 An inefficient conglomerate’s stock market value 40.3 Put the sequence of events in the correct order. The first stage is a. look at B opposite to help you. a Corporate raiders calculate that a large company is undervalued. b Investors buy the bonds because they pay a high interest rate. c The new owners sell some of the company’s subsidiaries

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