Merger:

■ The union of two corporations to form a new corporation

Acquisition:
■ A larger company buying a smaller one

Divestiture
■ A firm selling off one or more of its business units (often unrelated or
underperforming units)

Spin-off
■ Setting up one or more of the company’s units as new businesses (purpose: to
raise capital)

Joint venture
■ 2 companies setting up a new (outside) company for collaboration and joint
ownership
Mergers:
 AT&T Wireless merged with Cingular, to become
the national leader in cell phone service.
Cingular no longer exists as a brand.
Acquisitions:
 JPMorgan Chase bought Bear Stearns for $240
million (March 17, 2008)
 Google purchased DoubleClick, an online
advertising company, for US$3.1 billion. (April
2007)
 HP bought Compaq Computer. Although the
Compaq brand name still exists, the company
no longer exists.
Divestitures:
 The U.S. Department of Justice will require
Verizon to sell off Unicel's mobile phone
infrastructure in six areas of Vermont, New York
and Washington (6/10/2008)
 GE announced it will sell its GE Appliances
division. Possible buyers include Electrolux,
Haier and LG Electronics.
Spin-Offs:
 In 2004, GE (General Electric) spun-off its
mortgage and life insurance companies into a new
company called Genworth Financial. It also sold its
Financial Guaranty Insurance Company, a backer
of municipal and corporate bonds, to a consortium
of companies.
 Lehman Brothers will spin off to its shareholders
$25 billion to $30 billion of its commercial real
estate assets into a separate publicly-traded
company to strengthen its balance sheet & keep
the value of the real estate company (Sept. 2008)
Joint Ventures:
 UOP, a subsidiary of conglomerate Honeywell,
announced today that it has signed a letter of
intent with bio-oil veteran Ensyn to form a joint
venture to produce second generation biofuels
for power generation, heating and eventually
transportation. (Sept. 10, 2008)
 Chairman
Shareholders

Board of Directors

CEO

President

CFO V.P.s
Rights Risks
 Elect the Board of  The value of stock
Directors declines.
 Benefit from stock
 Dividends are cut or
appreciation
(increase in value) not paid.
 Receive dividends  In case of
 Appoint auditors to bankruptcy, the
judge the company’s stockholders are
financial statements last in line to receive
 Approve the issue of compensation (usually
new shares / stocks nothing is left).
or the repurchase of
existing stocks
 Protect investors’ interests
 Assure that the company is profitable
and stable
 Decide on “big picture” corporate
issues
 Vote on important strategic moves
 Review financial results
 Establish corporate management
policies
 Appoint and fire upper-level managers
 Evaluate performance of high-level
managers
Process:
election

Process:
hire /
appointment

9
 Head of the Board of Directors
 Presides at meetings
 Sets the Board’s agenda
 Makes sure the directors have

information necessary to understand

and make decisions
 Ensures that directors’ expertise is

utilized and that all directors

contribute
 Top decision-maker
 Leader and visionary
 Face of the company to outside

world
 Focus on strategic issues
 Accountable to Board for the

company’s performance
 Selects senior executives and assists

in selecting board members

 Oversees top executives
 Overall responsibility for
management of the corporation
 Responsible for day-to-day

operations
 Responsible for carrying out orders

of the Board
 Vice-presidents of company divisions

report to him or her

 What are your questions?
 Find examples in China of:
 Mergers
 Acquisitions
 Spin-offs
 Divestitures
 Joint Ventures