Current Events 2Current Events 2

Mergers and AcquisitionsMergers and AcquisitionsTakeoversTakeovers

So last time…So last time…

We discussed change in leadership We discussed change in leadership and how that is not always a bad and how that is not always a bad thingthing

So now we’re talking about a change So now we’re talking about a change in the company itself!!!!!!!!!!!in the company itself!!!!!!!!!!!

Mergers and Mergers and AcquisitionsAcquisitions

Big words for changes in the Big words for changes in the companiescompanies

What are they?What are they?

Merger: When 2 companies combine Merger: When 2 companies combine to form a new company to form a new company

Acquisition: When one company buys Acquisition: When one company buys out another company to make out another company to make themselves biggerthemselves bigger

Lets look at a Merger!Lets look at a Merger!

United Airlines and Continental United Airlines and Continental http://www.guardian.co.uk/business/2010/sep/17/united-continental-merger-agreementhttp://www.guardian.co.uk/business/2010/sep/17/united-continental-merger-agreement

So both are working together to So both are working together to

make more revenue and capture make more revenue and capture more of the marketmore of the market

Pros and Cons Pros and Cons

Helps capture a Helps capture a bigger section of bigger section of the marketthe market

Get to use each Get to use each company’s company’s advantages to advantages to benefitbenefit

Employees may Employees may have to be let gohave to be let go

Finance may have Finance may have to be combined to be combined which is an issue which is an issue when dealing with when dealing with debtdebt

Let’s look at an Acquisition Let’s look at an Acquisition

Pfizer buys King?Pfizer buys King? http://www.bloomberg.com/news/2010-10-12/pfizer-agrees-to-purchase-king-pharmaceuticals-for-3-6-billion-in-cash.htmlhttp://www.bloomberg.com/news/2010-10-12/pfizer-agrees-to-purchase-king-pharmaceuticals-for-3-6-billion-in-cash.html

One is buying the other out, so really One is buying the other out, so really

only helps the one companyonly helps the one company

Pros and Cons Pros and Cons

Helps company Helps company taking over to taking over to expand expand

Keeps the company Keeps the company being taken over being taken over out of bankruptcyout of bankruptcy

Once again, jobs at Once again, jobs at risk, even CEOs of risk, even CEOs of King aren’t King aren’t guaranteed jobsguaranteed jobs

Might not be Might not be approved by approved by government which government which is trying to stop is trying to stop monopoliesmonopolies

So… how does this So… how does this affect Stock Price?affect Stock Price?

Well, let’s see…Well, let’s see…

You tell meYou tell me

Go to finance.yahoo.comGo to finance.yahoo.com Look at the following tickersLook at the following tickers

• UAL – United Continental Holdings UAL – United Continental Holdings (check to see how it’s doing after the (check to see how it’s doing after the merger)merger)

• PFE – PfizerPFE – Pfizer• KG – King PharmaceuticalsKG – King Pharmaceuticals

Observe them a while, and lets see Observe them a while, and lets see how the stocks change based on the how the stocks change based on the new events new events

You tell me #2You tell me #2

Look in the news for investor Look in the news for investor predictionspredictions

Check to see what they are saying Check to see what they are saying and more importantly why they are and more importantly why they are saying itsaying it

The EndThe End

Come back next meeting with Come back next meeting with your conclusions!your conclusions!