An accretive acquisition is one that will increase the acquiring company's earnings per share (EPS).

An accretive acquisition increases the acquiring company's earnings per share (EPS). An accretive acquisition is similar to the practice of bootstrapping, where an acquirer purposely buys a company with a low price-earnings (P/E) ratio through a stock swap transaction to boost the post-acquisition EPS of the newly formed combined business and encourage a rise in the price of its shares. So, value in an accretive acquisition is generated because the buyer of a smaller company is able to add the acquired business's pro-forma EBITDA/earnings ratio to its own EBITDA/earnings ratio, where EBITDA is earnings before interest, taxes, depreciation, and amortization. Unlike an acquisition that is conducted due to research and development or product acquisition purposes, as was the case with Facebook's purchase of Oculus Rift, an accretive acquisition immediately increases the value of the acquiring company's stock. If the larger company had an EPS of $2 and calculated that if it acquired a smaller company with an EPS of $2.50, it would realize a combined pro-forma EPS of $2.15, the gross value of the acquisition would be 15%.

Accretive Acquisition

An acquiree, also known as a target firm, is a company that is purchased under a corporate acquisition.

Vodafone Acquires Mannesmann in the Largest Acquisition in History

Order Approving the Merger of Bank Holding Companies

An acquiree is a company that is purchased in a merger or acquisition. During a takeover scenario, it's common to see the acquiree's share price quickly shift to reflect the price per share offered by the acquirer. For example, if Company ABC is trading at $12 per share and has 100,000 shares outstanding when it's acquired for $2 million by Company XYZ, ABC's share price should then jump to approximately $20 per share ($2,000,000 ÷ 100,000 = $20). Usually, the acquiree will see a short-term movement in the price of its shares to reflect the price per share offered by the acquirer. The price per share agreed as part of a deal should immediately be reflected in the share price of the acquiree.

Acquiree

An acquirer is a company that acquires rights to another company or business relationship through a deal.

An acquirer is a company that obtains the rights to another company or business relationship through a deal. The retailer would enlist the services of a merchant acquirer, also known as a merchant bank, that would take control of the merchant's account and accept deposits into the account from customer payments. A merchant acquirer is a merchant bank utilized by a merchant to process electronic payments for their customers. Commonly, acquirers are also financial institutions that acquire the rights to a merchant account that allows them to service and manage the merchant’s bank account related to customer electronic payments. A merchant acquirer is generally a bank service provider that manages electronic deposits of funds from clients paid to a merchant account.

Acquirer

An acquisition adjustment pertains to the premium a business pays to acquire another, which can affect depreciation, net income and taxes.

Gilead Sciences to Acquire Kite Pharma for $11.9 Billion

An acquisition adjustment describes the difference between the price an acquirer pays to purchase another company and the net original cost of the target’s assets. Generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) require companies to assess the value of goodwill, the portion of the purchase price exceeding the sum of the net fair value of all recognizable assets bought in the acquisition and the liabilities assumed in the process, on their financial statements at least once a year and record any impairments: a permanent reduction in the value of assets. In a merger and acquisition (M&A) transaction, it's common for the acquiring company to pay a premium, meaning it bids more than the target company is currently deemed to be worth according to its market and book value: total assets plus intangible assets and liabilities. Second, and on a deeper level, how the acquisition adjustment is treated ultimately affects how assets are capitalized and depreciated, which, in turn, impacts net income (NI), a key gauge of corporate profitability, and corporate income taxes. Usually, a company may prefer an acquisition adjustment if the brand and other hard to appraise intangible assets, such as patents and good customer relations, provide it with value.

Acquisition Adjustment

Acquisition financing is the capital that is obtained for the purpose of buying another business.

Acquisition financing is the capital that is obtained for the purpose of buying another business. A bank might be more inclined to approve financing if the company to be acquired has a steady stream of revenues, steady or growing EBITDA, which is a cash metrics that would help the acquirer to pay back the debt obligations from the loan on the acquisition, substantial or sustained profits, as well as valuable assets for collateral. Other types of acquisition financing including Small Business Association (SBA) loans, debt security, and owner financing. Other means of financing an acquisition include debt that is paid back as shares and interest in the company making the acquisition. Favorable rates for acquisition financing can help smaller companies reach economies of scale, which is generally viewed as an effective method for increasing the size of the company's operations.

Acquisition Financing

An acquisition is a corporate action in which one company purchases most or all of another company's shares to gain control of that company.

AtHome Agrees to Acquire Excite In Stock Deal Valued at $7.5 Billion

A Brief Guide to the Tumultuous 30-Year History of AOL

Table of Contents
What Is an Acquisition?
Why Make an Acquisition?
Acquisition, Takeover, or Merger? Hostile acquisitions don't have the same agreement from the target firm, and so the acquiring firm must actively purchase large stakes of the target company to gain a controlling interest, which forces the acquisition. In 2000, in a masterful display of overweening confidence, the young upstart AOL purchased the venerable giant Time Warner for $165 billion; this dwarfed all records and became the biggest merger in history. ﻿﻿ The vision was that the new entity, AOL Time Warner, would become a dominant force in the news, publishing, music, entertainment, cable, and Internet industries. An acquisition is when one company purchases most or all of another company's shares to gain control of that company. Certainly, the AT&T-Time Warner acquisition deal of 2018 will be as historically significant as the AOL-Time Warner deal of 2000; we just can't know exactly how yet.﻿﻿ These days, 18 years equals numerous lifetimes—especially in media, communications, and technology—and much will continue to change.

Acquisition

Acquisition indigestion is a slang term that describes the difficulties that a company can face implementing a merger or acquisition.

Acquisition indigestion is a slang term that describes the practical difficulties that a company may face while adjusting to the consequences of a merger or acquisition deal. Some of the biggest merger and acquisition disasters in American business history are cautionary tales of acquisition indigestion:
The 2005 takeover of Nextel Communications by Sprint looked like a winner: Nextel had a strong base of business customers while Sprint catered to the consumer market. Broadly speaking, acquisition indigestion is a symptom that the company that has made a merger or acquisition happen is having difficulty making the most of it. Acquisition indigestion is a slang term that describes the practical difficulties that a company may face while adjusting to the consequences of a merger or acquisition deal. It occurs often when a company acquires another company in order to increase its earnings growth, only to find that it lacks the necessary infrastructure to successfully absorb and manage its acquisition.

Acquisition Indigestion

An acquisition premium is is a figure that's the difference between the estimated real value of a company and the actual price paid to acquire it.

An acquisition premium is a figure that's the difference between the estimated real value of a company and the actual price paid to acquire it. After the acquiring company determines the real value of its target, it decides how much it is willing to pay on top of the real value so as to present an attractive deal to the target firm, especially if there are other firms that are considering an acquisition. However, not every company pays a premium for an acquisition _intentionally_.
Using our price-per-share example, let's assume that there was no premium offer on the table and the agreed-upon acquisition cost was $26 per share. An acquisition premium might be paid, too, if the acquirer believes that the synergy created from the acquisition will be greater than the total cost of acquiring the target company. Goodwill factors in intangible assets like the value of a target company's brand, solid customer base, good customer relations, healthy employee relations, and any patents or proprietary technology acquired from the target company.

Acquisition Premium

Companies are affiliated when one company is a minority shareholder of another. In most cases, the parent company will own less than a 50% interest in its affiliated company.

Companies are affiliated when one company is a minority shareholder of another. The parent company generally owns less than a 50% interest in its affiliated company, and the parent keeps its operations separate from the affiliate. Examples of rules enforced by the SEC include:
Rule 102 of Regulation M prohibits issuers, selling security holders, and their affiliated purchasers from bidding for, purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of a distribution until after an applicable restricted period has passed.
Before disclosing nonpublic personal information about a consumer to a nonaffiliated third party, a broker-dealer must first give a consumer an opt-out notice and a reasonable opportunity to opt out of the disclosure. Companies may be affiliated with one another to get into a new market, to maintain separate brand identities, to raise capital without affecting the parent or other companies, and to save on taxes. In most cases, the parent company will own less than a 50% interest in its affiliated company.

Affiliated Companies

An all-cash, all-stock offer is a proposal by one company to purchase all of another company's outstanding shares from its shareholders for cash.

An all-cash, all-stock offer is a proposal by one company to purchase all of another company's outstanding shares from its shareholders for cash. Also, if the future of the company is in question or if the acquired company's stock price has been struggling, shareholders might have the opportunity to sell shares for a premium if the acquired company's stock surges on the news of the acquisition. Another possible acquisition method would be for the acquiring company to offer shareholders an exchange of all the shares they hold in the target company for shares in the acquiring company. An all-cash, all-stock offer is a proposal by one company to buy another company's outstanding shares from its shareholders for cash. An all-cash, all-stock offer is a proposal by one company to purchase all of another company's outstanding shares from its shareholders for cash.

All-Cash, All-Stock Offer

An all-cash deal is the purchase of a company or asset for all cash without the presence of financing or exchange of stock.

An all-cash deal refers to any transaction where cash is exchanged for an asset. An all-cash deal is an exchange of an asset for cash without the use of any other monetary means, such as financing or exchange of stocks. An all-cash deal in a real estate purchase helps the seller through efficiency and certainty while it helps a buyer through price negotiation and no financing cost. A check or wire transfer is the most common way in which an all-cash deal occurs, as opposed to the exchange of physical cash. When an all-cash deal occurs in the purchase of a target firm by an acquiring company, there is usually a mix of funds that are used in making the purchase.

All-Cash Deal

An amalgamation is a combination of two or more companies into a new entity. Amalgamation is distinct from a merger because neither company involved survives as a legal entity.

Resolution No. 1: Approval of Merger of Natco Organics Limited (NOL) a WOS of the Company

An amalgamation is a combination of two or more companies into a new entity. The transferor company—the weaker company—is absorbed into the stronger transferee company, thus forming an entirely different company. One company is acquired by another, and shareholders of the transferor company do not have a proportionate share in the equity of the combined company. The transferor company is absorbed into the stronger, transferee company, leading to an entity with a stronger customer base and more assets. The new company officially becomes an entity and issues shares to shareholders of the transferor company.

Amalgamation

An anti-greenmail provision is a special clause in a company’s corporate charter that prevents the board of directors from approving greenmail payments.

An anti-greenmail provision is a special clause in a company's corporate charter that prevents its board of directors from approving greenmail payments. An anti-greenmail provision is a special clause in a company's corporate charter that prevents its board of directors from approving greenmail payments. Anti-greenmail provisions take this controversial option off the table, preventing a board from buying back company stock at a premium from a hostile investor who is primarily interested in a quick payoff rather than a genuine business relationship. Rather than making a premium payment to the hostile party and to all shareholders, the provision requires any one-off greenmail payment be subject to a shareholder vote and majority approval. American Century Investments, which manages exchange-traded funds, notes that many anti-greenmail proposals prevent a corporation from paying a premium to buy out a 5%-or-greater shareholder without first holding a shareholder vote.

Anti-Greenmail Provision

Assented stock refers to securites owned by a shareholder who has agreed to a takeover.

Assented stock consists of securities owned by a shareholder who has agreed to a takeover bid for a company. However, sometimes assented shares may be traded on a separate market from non-assented shares, with the acquiring company setting up the market so that shareholders who have accepted the takeover share price can continue trading their shares. This separate market, referred to as an assented share trading facility, is established so that the value of the assented shares is set at the price that the acquiring company has indicated that it will pay, which may be higher than the amount non-assented shares would fetch on the open market. Assented stock, aka assented shares, may be traded in a different market than non-assented stock, which represents shares of shareholders who are holding out on the takeover. During the takeover negotiations, different prices may be quoted for assented and non-assented stock; the assented stock's price is usually higher.

Assented Stock

Asset stripping is the process of buying an undervalued company with the intent of selling off its assets to generate a profit for shareholders.

Asset stripping is the process of buying an undervalued company with the intent of selling off its assets to generate a profit for shareholders. If the value of the company is currently $100 million but another company believes that it can sell each of its three businesses, their brands, and real estate holdings to other companies for $50 million each, an asset-stripping opportunity exists. Asset stripping is when a company or investor buys a company with the goal of selling off its assets to make a profit. Asset stripping weakens a company, which has less collateral for borrowing and may have its value-producing assets stripped out, leaving it less able to support the debt it has. The individual assets of the company, such as its equipment, real estate, brands, or intellectual property, may be more valuable than the company as a whole due to such factors as poor management or poor economic conditions.

Asset Stripping

A back-end plan is an anti-acquisition strategy and type of poison pill. 

A back-end plan is an anti-acquisition strategy in which the target company provides existing shareholders—with the exception of the company attempting the takeover—with the ability to exchange existing securities for cash or other securities valued at a price determined by the company’s board of directors.
A back-end plan, also known as a note purchase rights plan, is a type of poison pill defense. A back-end plan is an anti-acquisition strategy in which the target company provides existing shareholders—with the exception of the company attempting the takeover—with the ability to exchange existing securities for cash or other securities valued at a price determined by the company’s board of directors.
A back-end plan, also known as a note purchase rights plan, is a type of poison pill defense. A back-end plan is an anti-acquisition strategy in which the target company provides existing shareholders—with the exception of the company attempting the takeover—with the ability to exchange existing securities for cash or other securities valued at a price determined by the company’s board of directors. By providing shareholders with the right to obtain shares with a higher value if the acquiring company reached a majority stake, the acquiring company would not be able to force a lower share price to complete the acquisition. Companies fending off a takeover bid may utilize several different techniques designed to make the acquisition so costly and difficult that the acquiring company either gives up—or is forced to negotiate with the company board rather than purchasing shares from existing shareholders.

Back-End Plan

A backflip takeover is a rare type of takeover in which the acquirer becomes a subsidiary of the company it purchased.

Evolution of the SBC and AT&T Brands : A Pictorial Timeline

A backflip takeover is a rare type of takeover that occurs when an acquirer becomes a subsidiary of the company it purchased. A backflip takeover is a rare type of takeover that occurs when an acquirer becomes a subsidiary of the company it purchased.
Upon completion of the deal, the two entities join forces and retain the name of the company that was bought. SBC bought AT&T because the merger allowed SBC to grow significantly, accessing AT&T's large network and customer base, allowing other subsidiaries of SBC to expand beyond their regional areas of the business to become a truly national player. AT&T accepted the merger because, at the time, it was struggling with Internet technology, the rise of the cellphone industry, which at the time it had little presence, and regulatory decisions that left it less competitive than it once was.
With this merger, SBC became the largest provider of data and phone services to corporate entities in America, and AT&T lived on through the merger in a business that it was otherwise struggling in. Though SBC decided to use AT&T's name and history after the merger, internally, the company utilized SBC's corporate structure and stock price history.

Backflip Takeover

Backward integration is a type of vertical integration that includes the purchase of, or merger with, suppliers. 

Backward integration is a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by businesses up the supply chain. In short, backward integration involves buying part of the supply chain that occurs prior to the company's manufacturing process, while forward integration involves buying part of the process that occurs after the company's manufacturing process. In short, backward integration occurs when a company initiates a vertical integration by moving backward in its industry's supply chain. Vertical integration might lead a company to control its distributors that ship their product, the retail locations that sell their product, or in the case of backward integration, their suppliers of inventory and raw materials. Backward integration is a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by businesses up the supply chain.

Backward Integration

Badwill, also known as negative goodwill, occurs when a company purchases an asset at less than the net fair market value.

Badwill, also known as negative goodwill, occurs when a company purchases an asset or another company at less than its net fair market value. SFAS 141 defines badwill as the difference between the fair market value of an asset and the price paid to acquire it, when the price paid is lower than the fair market value. In this case, the acquiring company records on its balance sheet the difference between the fair market value of the company and the price paid as negative goodwill, also known as badwill, which is also an intangible asset. Badwill, also known as negative goodwill, occurs when a company purchases an asset or another company at less than its net fair market value. Badwill, also known as negative goodwill, occurs when a company or asset is purchased for a price below its fair market value.

Badwill

In a bargain purchase, a corporate entity is acquired by another for an amount that is less than the fair market value of its net assets.

A bargain purchase involves assets acquired for less than fair market value. After calculating the fair value of its assets and liabilities, it’s found that the fair value of its net assets to be $700,000, or $1 million in assets less $300,000 in liabilities. Current accounting rules for business combinations require the acquirer to record the difference between the fair value of the acquired net assets and the purchase price as a gain on its income statement due to negative goodwill. Another deal that emerged from the financial crisis to illustrate a bargain purchase: The takeover of HBOS plc (the holding company of Bank of Scotland plc) by Lloyds TSB in 2009 for far less than the value of net assets produced negative goodwill in the amount of approximately GBP 11 billion that was added to Lloyd's capital base and its net income that year. In a bargain purchase business combination, a corporate entity is acquired by another for an amount that is less than the fair market value of its net assets.

Bargain Purchase in Finance

In business, a bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth.

In business, a bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth in the market. A bear hug can be interpreted as a hostile takeover attempt by the company making the offer, as it's designed to put the target company in a position where it is unable to refuse being acquired. To qualify as a bear hug, the acquiring company must make an offer well above market value for a large number of a company’s shares. In business, a bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth in the market. If a target company refuses to accept a bear hug offer then it risks being sued by shareholders for not acting in their best interest.

Bear Hug: Business

Bid support has many meanings within the financial industry, and can refer to stock price manipulation or supporting a takeover bid.

Bid support has many meanings within the financial industry. Bid support, as a form of market manipulation, involves multiple bids for small amounts of a particular stock being placed just below the highest bid price posted by market makers. This layering absorbs some of the selling pressure and prevents the stock from falling sharply, while the appearance of a number of bids placed through different firms gives sellers the impression that demand for the stock is much greater than it is. 2.  A substantial number of orders from different market makers on the bid side of a stock, which can signal a trader to buy the stock on the expectation that it will advance. This may cause sellers and short-sellers of the stock to rethink their strategy and back away from attempts to drive down the stock.

Bid Support

A black knight is a company that makes an unwelcome offer to assume control of another.

A black knight is a company that makes an unwelcome, hostile takeover bid. Like raiders, black knights tend to target companies that are mismanaged, have excessive costs, could be run more profitably as a private company, or experience other problems that can be fixed to make it more valuable.
White knights are the opposite of black knights. However, a black knight company conduct a takeover bid regardless, such as by initiating a tender offer directly to shareholders, engaging in a proxy fight, or attempting to buy the necessary company stock in the open market. Gray knights take advantage of the fact that the target company sees them as a friendlier alternative to a hostile black knight; they will often use that status as a negotiating chip to get a more favorable deal when a persistent unwanted predator comes calling. Management of the target company often doesn’t want to sell to a black knight company because they typically have sinister goals.

Black Knight

A breakup fee is used in takeover agreements as leverage on the seller against backing out of the deal to sell to the purchaser. 

AT&T CEO pay docked $2 million for T-Mobile debacle

A breakup fee is used in takeover agreements as leverage on the seller against backing out of the deal to sell to the purchaser. Breakup fees are normally 1% to 3% of a deal's value.
A breakup fee is used in takeover agreements as leverage on the seller against backing out of the deal to sell to the purchaser. Theses events typically include:
Break-up of the negotiations by one of the parties
A seller choosing a different buyer than the one named in the preliminary agreement
When a seller opts to open the investment opportunity to the public instead of the private investor named in the agreement
If a defect is discovered in the target company during discovery that had not been previously disclosed
Breakup fees do not require parties to close a deal under any circumstances A breakup fee, or termination fee, is required to compensate the prospective purchaser for the time and resources used to facilitate the deal. Sometimes a breakup fee can discourage other companies from bidding on the company because they would have to bid a price that covers the breakup fee.

Breakup Fee

A buy, strip and flip occurs when a private equity firm buys a company, guts and restructures it, and then sells it on in an IPO shortly after.

Buy, strip and flip is a phrase used to describe the common practice of private equity firms buying undervalued companies, stripping them down, and then selling off the restructured entity a short time later in an initial public offering (IPO).
Buy, strip and flip is a phrase used to describe the controversial business practices of some private equity firms. Buy, strip and flip is a phrase used to describe the common practice of private equity firms buying undervalued companies, stripping them down, and then selling off the restructured entity a short time later in an initial public offering (IPO).
Buy, strip and flip is a phrase used to describe the controversial business practices of some private equity firms. This process can be very profitable for a private equity firm and comes with the added bonus of potentially making the acquired company more attractive to prospective buyers once it is cut loose with an IPO. An example of a company that flourished after a private equity buyout is Dollar General (DG). The discounter was purchased in 2007 by KKR, sold on for a tidy profit, and is now one of the country’s fastest-growing retailers. Decisions for how to handle the target are not necessarily made to boost its IPO valuation once it is put on the public market, but rather to line the pockets of the private equity firm.

Buy, Strip And Flip

A business broker is an individual or company that assists mainly in the purchase and sale of small, main street businesses.

A business broker is an individual or company that assists in the purchase and sale of small, main street businesses. Those wishing to buy or sell a company can locate business brokers through attorneys, accountants, and professional associations, such as the International Business Brokers Association (IBBA). Business brokers not only manage these steps but also ensure confidentiality by requiring interested buyers to agree not to disclose the details of the potential business sale. Business brokers are paid through commissions based on a percentage, typically upwards of 5 percent, of the sale price they secure for the company. A business broker is an individual or company that assists in the purchase and sale of small, main street businesses.

Business Broker

A buyout is the acquisition of a controlling interest in a company; it's often used synonymously with the term "acquisition."

A buyout is the acquisition of a controlling interest in a company and is used synonymously with the term _acquisition._ If the stake is bought by the firm’s management, it is known as a management buyout and if high levels of debt are used to fund the buyout, it is called a leveraged buyout. If the stake is bought by the firm’s management, it is known as a management buyout, while if high levels of debt are used to fund the buyout, it is called a leveraged buyout. Sometimes a buyout firm believes it can provide more value to a company’s shareholders than the existing management.
Management buyouts (MBOs) provide an exit strategy for large corporations that want to sell off divisions that are not part of their core business, or for private businesses whose owners wish to retire. The target company's assets are typically provided as collateral for the debt, and buyout firms sometimes sell parts of the target company to pay down the debt.

Buyout

A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors.

A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors. 1:44
In a carve-out, the parent company sells some of its shares in its subsidiary to the public through an initial public offering (IPO), effectively establishing the subsidiary as a standalone company. A company undertaking a carve-out is not selling a business unit outright but, instead, is selling an equity stake in that business or relinquishing control of the business from its own while retaining an equity stake. This type of carve-out may be used if the company does not believe that a single buyer for the entire business is available, or if the company wants to maintain some control over the business unit. A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors.

Carve-Out

The Celler-Kefauver Act strengthened powers granted by the Clayton Act to prevent mergers that could possibly result in reduced competition.

The Celler-Kefauver Act is one of several U.S. laws designed to prevent certain mergers and acquisitions (M&A) from creating monopolies or otherwise significantly reducing competition in the United States. It went further than the previously enacted antitrust laws, the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, which only tried to limit horizontal mergers within the same sector, by targeting vertical and conglomerate mergers as well.
In vertical mergers, companies on different tiers of a supply chain join forces, which can be an antitrust problem if a company is buying its competitors’ suppliers. The Celler-Kefauver Act, occasionally referred to as the Anti-Merger Act, extended antitrust laws to cover all types of mergers across industries. The Celler-Kefauver Act is one of several U.S. laws designed to prevent certain mergers and acquisitions (M&A) from creating monopolies or otherwise significantly reducing competition in the United States. It was passed in 1950 to strengthen existing antitrust laws and close loopholes present in the Clayton Act and the Sherman Antitrust Act.

Celler-Kefauver Act

A circular merger is a transaction to combine companies that operate within the same general market, but offer a different product mix. 

A circular merger is a transaction to combine companies that operate within the same general market, but offer a different product mix. For example, if a snack food company engages in a circular merger with a beverage company, the two may be able to provide a wider variety of options to the same snack food market. Companies also pursue circular mergers to share common distribution and research facilities and promoting market enlargement—the acquiring company benefits by economies of resource sharing and diversification. An example of a circular merger is the joint venture formed in 2017 between McLeod Russel, one of the world's largest tea plantation companies, with Eveready Industries India Ltd, a battery and flashlight manufacturer. The companies hoped that this arrangement would help develop the group's packet tea business with the two firms combining Eveready's marketing and distribution know-how with McLeod Russel's tea plantation knowledge.

Circular Merger

A club deal is a private equity buyout or the assumption of a controlling interest in a company that involves several different private equity firms.

A club deal is a private equity buyout or the assumption of a controlling interest in a company that involves several different private equity firms. A club deal refers to a private equity buyout where several private equity firms pool their assets to acquire a company. A club deal is a private equity buyout or the assumption of a controlling interest in a company that involves several different private equity firms. There are some private equity firms that do not engage in club deals as a rule, but the choice is up to the firm and the wishes of the limited partners who make most of the big money decisions within those firms. For example, there are concerns that club deals decrease the amount of money that shareholders receive, as a group of private equity firms has fewer parties to bid against during the acquisition process.

Club Deal

The co-insurance effect is an economic theory that posits greater diversification from business combinations reduces the risk of debt default.

The co-insurance effect is an economic theory that suggests mergers and acquisitions (M & M&A) decrease the risk of holding debt in any of the combined entities. Since the combined entity should be more financially secure, it can reduce the cost of issuing new debt, making it cheaper to raise additional funds.
Depressed yields may make an issuance less attractive for bondholders who will seek higher rates of return to offset the risk.
Suppose a firm owns commercial real estate properties concentrated in a particular metropolitan area. The co-insurance effect is an economic theory that suggests mergers and acquisitions (M & M&A) decrease the risk of holding debt in any of the combined entities. Some downsides are such as if the public disdains the deal, the companies seem like a bad match, and investors knock the share price lower in response.
The co-insurance effect posits that firms engaging in mergers and acquisitions wind up benefiting from increased diversification. That risk reduction suggests the company would likely be able to issue debt at a lower rate after its acquisition since the geographic diversification it gained in the merger reduced the likelihood of a debt default.

Co-Insurance Effect

A comparable transaction cost is a factor in estimating the value of a company being considered as a merger and acquisition (M&A) target.

The cost of a comparable transaction is one of the major factors in estimating the value of a company that is being considered as a merger and acquisition (M&A) target. The comparable transaction valuation is generally used in conjunction with other data including the company's discounted cash flow, price-to-earnings ratio, price-to-sales ratio, and price-to-cash-flow ratio. Comparable transaction analysis was one of several valuation techniques analyzed for this deal, the others including price-earnings and price-earnings-growth multiples. In either case, the comparable transaction method of valuation can help a company arrive at a price for the acquisition that shareholders are willing to accept. The cost of a comparable transaction is one of the major factors in estimating the value of a company that is being considered as a merger and acquisition (M&A) target.

Comparable Transaction

A congeneric merger is where the acquiring company and the target company do not offer the same products but are in a related industry or market.

A congeneric merger is a type of merger where two companies are in the same or related industries or markets but do not offer the same products. A product extension merger is a kind of congeneric merger where the product line of one company is added to the product line of the other. In contrast to a congeneric merger, where the target and the acquirer are in similar industries, a conglomerate merger occurs between companies that are in no way related. A congeneric merger can allow a target and its acquirer to take advantage of overlapping technology or production processes to expand their product line or increase their market share. A congeneric merger is where the acquiring company and the target company are in the same or related industry but have different business lines or products.

Congeneric Merger

A conglomerate merger is a merger between firms that are involved in totally unrelated business activities. 

A conglomerate merger is a merger between firms that are involved in totally unrelated business activities. Some famous conglomerate mergers of recent times include Amazon and Whole Foods, eBay and PayPal, and Disney and Pixar.
Despite its rarity, conglomerate mergers have several advantages: diversification, an expanded customer base, and increased efficiency. Through diversification, the risk of loss lessens. If one business sector performs poorly, other, better-performing business units can compensate for the losses. Pure conglomerate mergers involve firms with nothing in common, while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions. There are two types of conglomerate mergers: pure, where the two firms continue to operate in their own markets, and mixed, where the firms seek product and market extensions. Opponents of conglomerate mergers believe that they can lead to a lack of market efficiency when large companies consolidate the industry by acquiring smaller firms.

Conglomerate Merger

A contingent payment sale is a type of sale where specifics of the sale, such as full sales price, depend upon future events. 

Contingencies: How They Work and Why They're a Buyer's Friend

Internal Revenue Code, Title 26, Section 483

A contingent payment sale is a type of sale where the specifics of the sale—such as the entire sales price or the number of fixed payments to complete the sale—depend upon future events. A contingent payment sale is a type of sale where the specifics of the sale—such as the entire sales price or the number of fixed payments to complete the sale—depend upon future events. A contingent payment sale might be issued by the buyer or the seller, and the seller may say the sale is contingent on the potential buyer being approved for a mortgage. An example of a contingent payment sale may occur when a company is under contract to purchase another company, but the sale will be completed several months out. A contingent payment sale is a type of sale where the specifics of the sale are tied to future events.

Contingent Payment Sale

The continuity of business enterprise doctrine is a taxation principle applicable to corporate mergers and acquisitions.

The continuity of business enterprise doctrine is a taxation principle applicable to corporate mergers and acquisitions. The doctrine holds that, in order to qualify as a tax-deferred reorganization, the acquiring entity must either continue the target company's historic business or should use a substantial portion of the target's business assets when conducting business. The continuity of business enterprise doctrine applies only to the business and business assets of the target company, and not to the acquiring company. For a transaction to qualify as a reorganization, thus treated favorably tax-wise, the continuity of business enterprise doctrine examines whether a target's shareholders, before the reorganization, have continued to hold a proprietary interest in the reorganized firm. For many business transactions, tax treatment can be a large motivator for a proposed transaction; although a highly technical matter, the continuity of business enterprise doctrine does carry significant consideration.

Continuity Of Business Enterprise Doctrine

The Continuity of Interest Doctrine requires shareholders of an acquired company to hold an equity stake in the acquiring company to allow tax deferral.

The Continuity of Interest Doctrine (CID) requires shareholders of an acquired company to hold an equity stake in the acquiring company to allow tax deferral. The doctrine, (or CID, also known as Continuity of Proprietary Interest) stipulates that a corporate acquisition of a target firm can be done on a tax-free basis if the shareholders of the acquired company receive and hold an equity stake in the acquiring company. The Continuity of Interest Doctrine (CID) requires shareholders of an acquired company to hold an equity stake in the acquiring company to allow tax deferral. In the case of a cash-only sale of stock in a target company, shareholders of the acquired firm would typically pay tax on the sale of shares when the acquisition is completed. The focus of the new regulations was primarily on the consideration received by the shareholders of the acquired company, with the objective of preventing a transaction that is actually a sale of the company from receiving tax-free status.

Continuity of Interest Doctrine (CID)

Cost synergy is savings, which can take many forms, in operating costs expected after the merger of two companies.

Cost synergy is the savings in operating costs expected after the merger of two companies. If one company owns information technology that makes it more efficient than competitors, this will provide the same benefit to the other company in the merger, resulting in cost savings. A merger can also create revenue synergies, which allow the newly formed company to generate more sales via efficiencies, such as access to patents or having complementary products. Cost synergy may also result from when one of the companies involved in the merger has proprietary technology that would benefit the other company. The cost savings due to cost synergy can take many forms, including layoffs, technological improvements, supply chain advancements, and research and development.

Cost Synergy

A counterbid is a purchase offer that counters the offer of another potential purchaser.

Dollar General Makes Proposal to Acquire Family Dollar for $78.50 Per Share

A counterbid is a response to an offer or bid that is more favorable for one party than a previously submitted bid. The purchaser can accept the seller's counterbid, or submit their own counterbid at terms that are more favorable than the initial bid, but less favorable than the seller's counterbid. For example, suppose Company A submits a bid to purchase Company B. Then Company C submits a counterbid to Company B offering more favorable terms. Dollar General's offer for Family Dollar was a counterbid to Dollar Tree's original offer. If the seller doesn't like the initial bid, they can offer a counterbid, indicating a price or terms they are willing to accept.

Counterbid

A counteroffer is a proposal made as a result of an undesirable offer. A counteroffer revises the initial offer and makes it more desirable for the person making the new offer.

A counteroffer is a response given to an initial offer. Counteroffers give the original offerer three options: accept it, reject it, or make another offer and continue negotiations.
Parties are not obligated by a contract until one accepts the other's offer. The counteroffer gives the original offerer three options: accept the counteroffer, reject it, or make another offer. Ms. X decides to make a counteroffer of $295,000 instead, thus putting the onus on Mr. Y to accept, reject, or counter that offer and continue negotiations again. A counteroffer is the response given to an offer, meaning the original offer was rejected and replaced with another one.

Counteroffer

Contingent value rights (CVRs) are often given to shareholders of an acquired company to ensure they receive certain benefits if a trigger event occurs.

Table of Contents
What Is a CVR? Understanding CVRs
Types of CVRs
CVRs as Unsecured Obligations
Real World Example of a CVR
Contingent Value Rights FAQs An acquiring company can pay less upfront for the acquired company, But if it hits certain performance targets in the future, its shareholders will receive additional benefits. Companies prefer non-transferable CVRs as transferable CVRs listed on an exchange require regulatory work and incur higher costs. Non-transferable CVRs, on the other hand, apply only to current shareholders of the acquired company and are distributed at the time of the merger.

Contingent Value Right (CVR)

A dead hand provision is an anti-takeover strategy that gives a company's board power to dilute a hostile bidder by issuing new shares to everyone but them.

The Ever-Evolving Poison Pill: The Pill in Asset Protection and Closely-Held Corporation Cases

A dead hand provision, also known as a dead hand poison pill, is a strategy utilized by a target company to ward off the advances of a hostile takeover. These measures kick in when the hostile bidder acquires a designated amount of the target company’s shares, typically between 15% to 20%.
Dead hand provisions may only be rescinded by the directors who adopted them and, therefore, cannot be stopped by ousting management via a proxy battle.
Acquisitions happen all the time, although not all of them are welcomed by company management. A dead hand provision, also known as a dead hand poison pill, is a strategy utilized by a target company to ward off the advances of a hostile takeover. Once a hostile bidder acquires a designated amount of the target company’s shares, typically between 15% to 20%, the dead hand provision kicks in, allowing only eligible members of the Board of Directors to buy newly issued shares at reduced prices. A dead hand provision is an anti-takeover strategy that involves issuing new shares to everyone but the hostile bidder seeking to buy the company.

Dead Hand Provision

A defensive acquisition is a strategy that consists of a company buying another company as a "defense" against market downturns or possible takeovers.

T‑Mobile Completes Merger with Sprint to Create the New T‑Mobile

Wireless subscriptions market share by carrier in the U.S. from 1st quarter 2011 to 2nd quarter 2020

A defensive acquisition is a corporate finance strategy that consists of companies acquiring other companies and assets as a "defense" against market downturns or possible takeovers. made a defensive acquisition an attractive opportunity.
Another potential example is the 2020 merger of T-Mobile US, Inc. (TMUS) and Sprint Corp.﻿﻿ By combining, the third- and fourth-largest wireless carriers in the U.S. became big enough to rival sector juggernauts Verizon Communications Inc. (VZ) and AT&T Inc. (T), during a period of industry-wide technological change.﻿﻿ Joining forces also made it a lot less likely that either one of them would be taken over by a larger peer, given that antitrust regulators aren’t much in favor of monopolies. A company viewed as an attractive acquisition, otherwise known as a target firm, may lose some of its luster if it is highly leveraged, as whoever takes it over would then have to inherit that debt burden.
Facebook, Inc.'s (FB) $19 billion takeover of WhatsApp in 2014 and nearly $1 billion acquisition of Instagram in 2012 may be considered defensive acquisitions.﻿﻿ ﻿﻿ In both instances, Facebook was working on or had similar capabilities, but the built-in user bases and growing competitive threats from each An acquisition can generally be categorized as defensive if it was executed primarily to prevent a company from losing market share, coming under attack, and potentially one day being swallowed up by a larger predator. By acquiring these firms the company protects itself from the advances of others, becoming large enough that any takeover will likely result in the acquirer running afoul of antitrust laws—regulations that monitor the distribution of economic power in business, making sure that competition is allowed to flourish and economies can grow.

Defensive Acquisition

A de-merger is a corporate restructuring in which a business is broken into components, either to operate on their own, to be sold or liquidated.

A de-merger is a corporate restructuring in which a business is broken into components, either to operate on their own, or to be sold or to be liquidated as a divestiture. A partial de-merger is when the parent company retains a partial stake in a de-merged company. A de-merger may take place for several reasons, including focusing on a company's core operations and spinning off less relevant business units, to raise capital, or to discourage a hostile takeover. The most common type of de-merger, the spin-off, results in the parent company retaining an equity stake in the new company. A common de-merger scenario would see a utility separate its business into two components: one to manage its infrastructure assets and another to manage the delivery of energy to consumers.

De-Merger

A dilutive acquisition is a takeover transaction that may decrease the acquirer's earnings per share (EPS).

A dilutive acquisition is a takeover transaction that decreases the acquirer's earnings per share (EPS) through lower (or negative) earnings contribution or if additional shares are needed to be issued by the acquiring company to pay for the acquisition. A dilutive acquisition is a takeover transaction that decreases the acquirer's earnings per share (EPS) through lower (or negative) earnings contribution or if additional shares are needed to be issued by the acquiring company to pay for the acquisition. However, just as dilutive acquisitions can lead to positive long-term EPS growth, it's possible that an accretive transaction can go bad in the long term, eroding EPS. A dilutive acquisition is a takeover transaction that decreases the acquirer's earnings per share (EPS). A dilutive acquisition can occur from lower (or negative) earnings contribution from the target company or if stock shares are issued to pay for the deal.

Dilutive Acquisition

Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. 

The Global Fossil Fuel Divestment and Clean Energy Investment Movement

Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. As a result of the disinvestment, the acquiring company can reduce the total cost of the purchase and determine the optimal use of the proceeds, which may include reducing debt, keeping the cash on the balance sheet, or making capital investments. A company may opt for the disinvestment of certain assets of a company it has acquired, particularly if those assets do not fit with its overall strategy. For example, a company focused on domestic operations may sell the international division of a company it has purchased, due to the complexities and costs of integration, as well as operating it on an ongoing basis. After the disinvestment, the company could allocate both the sales proceeds and recurring capital expenditures to the industrial division to maximize its ROI.

Disinvestment

Dissenters' rights allow shareholders to dissent from and obtain payment for the fair value of their shares in the event of certain corporate actions.

Under various forms of state legislation, dissenting shareholders of a corporation are entitled to receive a cash payment for the fair value of their shares, in the event of a share-for-share merger or acquisition (M&A) to which the shareholders do not consent. Under appraisal rights, a dissenting shareholder who objects to an extraordinary transaction may have their shares of the pre-merger corporation appraised, and be compensated for the fair market value of their shares by the pre-merger company. Under various forms of state legislation, dissenting shareholders of a corporation are entitled to receive a cash payment for the fair value of their shares, in the event of a share-for-share merger or acquisition (M&A) to which the shareholders do not consent. When a dissenting shareholder disagrees with a firm's actions, they can exercise appraisal rights; appraising their shares, and being paid the fair market value for them. Dissenters' rights ensure a shareholder that they can sell their shares at fair value in the event that a company takes a decision that they do not agree with.

Dissenters' Rights

A diversification acquisition is when a company takes a controlling interest in another company in order to expand its product and service offerings.

Corporate & U.S. News: Kellogg Adds RXBAR, Fastest Growing U.S. Nutrition Bar Brand, to Wholesome Snacks Portfolio

News and Press Releases: Unilever acquires Dollar Shave Club

Diversification acquisition is a corporate action whereby a company takes a controlling interest in another company to expand its product and service offerings. Diversification acquisition often occurs when a company needs to lift shareholder confidence and believe making an acquisition can facilitate a pop in the stock or buoy earnings growth. Big corporations typically find themselves involved in diversification acquisitions either to minimize the potential risks of one business component not performing well in the future, or to maximize the earnings potential of running a diverse operation. Takeovers between two companies that share the same SIC code are considered related or horizontal acquisitions, whereas two different codes fit in the framework of an unrelated takeover. For example, in 2017 Kellogg's (K) snapped up organic protein bar manufacturer RXBAR for $600 million to lift its struggling line of cereals and bars.﻿﻿﻿ It also presented an opportunity for the legacy food manufacturer to make headway in the rapidly growing natural food industry.

Diversification Acquisition

A divestiture is the disposal of a business unit through sale, exchange, closure, or bankruptcy.

Thomson Reuters Announces Definitive Agreement to Sell Its Intellectual Property & Science Business to Onex and Baring Asia for $3.55 Billion

The AT&T Divestiture: Was it Necessary? Was It a Success?

A divestiture is the partial or full disposal of a business unit through sale, exchange, closure, or bankruptcy. A divestiture may also occur if a business unit is deemed to be redundant after a merger or acquisition, if the disposal of a unit increases the sale value of the firm, or if a court requires the sale of a business unit to improve market competition. A divestiture most commonly results from a management decision to cease operating a business unit because it is not part of a company's core competency. A divestiture is the disposition or sale of an asset by a company as a way to manage its portfolio of assets. A divestiture is the partial or full disposal of a business unit through sale, exchange, closure, or bankruptcy.

Divestiture

Divestment is the partial or full disposal of a business unit through sale, exchange, closure, or bankruptcy.

Divestment is the process of selling subsidiary assets, investments, or divisions of a company in order to maximize the value of the parent company. Divestment is the process of selling subsidiary assets, investments, or divisions of a company in order to maximize the value of the parent company. The sale of assets typically involves cash and may trigger tax consequences for a parent company if assets are sold at a gain. Divestment involves a company selling off a portion of its assets, often to improve company value and obtain higher efficiency. Because the parent company typically retains a controlling stake in the subsidiary, equity carve-outs are most common among companies that need to finance growth opportunities for one of their subsidiaries.

Divestment

A dog and pony show is a colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers. 

Table of Contents
What Is a Dog and Pony Show?
Understanding a Dog and Pony Show
Dog and Pony Shows Today
Advantages and Disadvantages of a Dog and Pony Show
The Bottom Line
Dog and Pony Show FAQs Pros
Raise product or company awareness
Generates interest in a product or company
Ability to make direct sales or raise capital
Creates opportunities for networking
Time-consuming
Inefficient if the audience is not chosen correctly
Dog and pony shows can be a great way to bring product or business awareness to a large audience in order to drum up sales and capital. If a dog and pony show, or roadshow, fails to drum up enough interest for an IPO, this could lead to an undersubscribed issue or a low price for the shares, reducing the potential amount of capital a company will raise.
Dog and pony shows, however, can be time-consuming and sometimes inefficient, if the audience is not chosen correctly. A dog and pony show, in the financial context, refers to presentations to institutional and retail investors by executives of a company that is issuing securities as an initial public offering (IPO) or on a secondary basis. For companies looking to raise capital, via direct investments or through an IPO, a dog and pony show allows executives to present their business model, competitive edge, and sales forecasts, to potential institutional or retail investors.

Dog and Pony Show

A drag-along right enables a majority shareholder to force a minority shareholder to join in the sale of a company. During the sale of a company, prospective buyers are often looking for complete control of the target firm. There are benefits for both majority and minority shareholders with drag-along provisions.

A drag-along right is a provision or clause in an agreement that enables a majority shareholder to force a minority shareholder to join in the sale of a company. Certain rights may be included and instituted with the terms of a share class offering or in a merger or acquisition agreement.
Drag-along rights may be included and instituted with the terms of a share class offering or in a merger or acquisition agreement. In some situations such as this, majority shareholders may negotiate special share rights under an alternative class structure that may not be available to minority shareholders due to the implications of drag-along rights. Tag-along rights differ from drag-along rights since tag-along rights offer the minority shareholders the option to sell but do not mandate an obligation. A company’s bylaws will denote the ownership and voting rights that shareholders have, which may have implications on majority vs. minority.
Drag-along rights can be instituted through capital fundraising or during merger and acquisition negotiations.

Drag-Along Rights

A drop-dead fee is a fee paid by a borrower to a lender when a transaction the latter helps to finance falls through.

Dr Pepper/Seven-Up Companies, Inc. v. Federal Trade Commission

Global advisors get minimum fee guarantee

A drop-dead fee is a fee paid by a borrower to a lender when a transaction, usually an acquisition, financed by the latter falls through. This proposal, implemented to maintain IB interest in these types of transactions, meant that Indian investment bankers' fee structures on divestment deals included both a success fee, a fixed percentage of the gross sale proceeds of a government asset sale, and the drop-dead fee if the divestment deal goes awry. In 2001, the government of India introduced a law that entitled investment banks (IB) involved in government divestment deals—the process of selling shares of Indian publicly-owned enterprises—to a drop-dead fee if a deal falls through.﻿﻿ Six of them were eventually rewarded with a modest drop-dead fee of about $300,000 each for the troubles, while another 13 banks—which had smaller but still significant commitments of about $50 million apiece as lead managers—were left empty-handed because they failed to include the fee when negotiating the deal's terms. In the event that a loan is secured and then becomes unnecessary, the borrowing company must return the borrowed money, as well as, perhaps, paying a drop-dead fee penalty to compensate the loaning institution for lost interest.

Drop-Dead Fee

An eclectic paradigm is a theory based on a three-tiered framework that companies follow to determine if a direct foreign investment would be beneficial.

An eclectic paradigm, also known as the ownership, location, internalization (OLI) model or OLI framework, is a three-tiered evaluation framework that companies can follow when attempting to determine if it is beneficial to pursue foreign direct investment (FDI). An eclectic paradigm, also known as the ownership, location, internalization (OLI) model or OLI framework, is a three-tiered evaluation framework that companies can follow when attempting to determine if it is beneficial to pursue foreign direct investment (FDI). An eclectic paradigm is also known as the ownership, location, internalization (OLI) model or OLI framework. The goal is to determine if a particular approach provides greater overall value than other available national or international choices for the production of goods or services. The goal is to determine if a particular approach provides greater overall value than other available national or international choices for the production of goods or services.

Eclectic Paradigm

Face-amount certificate companies are issuers of face-amount certificates (FAC): Debt securities of a specified value backed by a security interest.

A face-amount certificate company is a type of corporation that raises money by issuing investors debt securities of a specified value. FACs are secured by enforceable legal claims or lien on collateral, enabling the lender to charge lower interest and, subsequently, reduce the costs to borrow money.
Company ABC is in need of a steady injection of capital to build its cash reserve and pleads with investors to help out by loaning it $20 million over five years. Face-amount certificate companies are issuers of face-amount certificates (FACs), which are debt securities of a specified value collateralized by the firm's assets. A face-amount certificate company is a type of corporation that raises money by issuing investors debt securities of a specified value. This technique is advantageous to them as backing debt with specific tangible assets under the company's control enables them to obtain financing at relatively low-interest rates.

Face-Amount Certificate Company

A fairness opinion is a report that is provided to the selling company in a merger or acquisition that analyzes the fairness of the acquisition price.

A fairness opinion is a report that evaluates the facts of a merger, acquisition, carve-out, spin-off, buyback, or another type of business purchase. Fairness opinions are a particularly good idea if the transaction is pending as the result of a hostile takeover, if there are multiple offers for the company at different prices, if company insiders are involved in the transaction, or if board members or shareholders have concerns about the fairness of the transaction. Fairness opinions are not always required in transactions involving public companies, but they can be helpful in reducing the risk associated with major financial actions or purchases, including the risk of litigation. A fairness opinion is a report regarding the fairness of a major financial action like a merger or takeover that an investment banker or an analyst may provide for a fee. XYZ Corp, as the target company in this scenario, hires an advisor at Independent Investment Bank to conduct an analysis and weigh in on the fairness of this offer.

Fairness Opinion

The fat man strategy is a defensive move against a company buyout. It involves bulking up with assets and debt to make it an unattractive target.

The fat man strategy is a defensive move made by a company in order to thwart a takeover attempt. If a target company's executives receive an unwanted offer for the company that shareholders might be inclined to accept, they quickly take on new debt and purchase undesirable assets in an attempt to make the company an unattractive purchase. The fat man strategy is a defensive move made by a company in order to thwart a takeover attempt. In an extreme case, the target company can change its profile entirely, becoming a different kind of company. This is achieved mainly by burdening the company with new resources, particularly those that the acquiring company is known to dislike.

Fat Man Strategy

A fixed-dollar value collar is a strategy where a company that may be acquired can protect itself from the stock price fluctuations of the acquiring firm.

Value Protection in Stock and Mixed Consideration Deals

The fixed-dollar value collar refers to a strategy that a company acquired during a merger may apply. By setting a floor and ceiling on the stock component of an acquisition deal, the company doing the purchasing will commit to delivering a fixed-dollar value of its stock for each share of the company that is to be acquired. Fixed-dollar value collars set the exchange level for the company being bought to exchange its shares for the shares of the acquiring company. It is meant to protect the target company's assets, delivering a consistent dollar value for each of the seller's shares even if the acquiring company's stock price should drop. The ratio determines the share exchange level for the company being bought to exchange its shares for the shares of the acquiring company.

Fixed-Dollar Value Collar

Flip-in poison pill is a provision enabling shareholders, other than the acquirer, to buy additional stock at a discount to deter hostile takeover attempts.

Judge Could Clear Way to Oracle-PeopleSoft Merger

A flip-in poison pill is a strategy used by a target company to prevent or discourage a hostile takeover attempt. Flip-in poison pill is a strategy enabling shareholders, other than the acquirer, to buy additional stock in a company targeted for takeover at a discount. Flip-in poison pill provisions are often found in a company's charter or bylaws, a corporate document outlining how the organization is to be run, as a public display of their potential use as a takeover defense. If the potential acquirer triggers a poison pill by accumulating more than the threshold level of shares, it risks discriminatory dilution in the target company. A flip-in poison pill is a strategy used by a target company to prevent or discourage a hostile takeover attempt.

Mergers and Acquisitions

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