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What are the terms used in Merger & Acquisition?
The terms used in Merger & Acquisition are explained below −
Acquirer − It is someone who purchases a company.
Acquisition − A company (1) taking control over another company (2) by purchasing more than 50% shares in company (2).
Amalgamation: − Combining two companies into a single company.
Asset deal − Acquirer buys only assets of selected companies.
Backward integration − Acquires purchases of Ancillaries Company of its own product.
Bootstrap effect − Bad reason to merge.
Cash considerations − Part of purchase price is given in the form of cash.
Compensation manipulation − Bad reason to merge
Conglomerate − Merge of unrelated units.
Debt issuance fees − Charges are charged by the investment banks.
Economics of scale − Decrease in fixed cost due to merger.
Economics of scope − Gain of technology or skills due to merger.
Empire building − Bad reason to merge.
Equity issuance fees − Fees charged by investment banks.
Excess purchase price − Purchase price is more than the net book value of assets.
Fair value adjustments − Increase/decrease of net book value of assets to its market fair value.
Friendly takeover − Board of directors approves the takeover.
Forward integration − Company acquires its retail outlet company of its products.
Goodwill: − Purchase price of net identifiable assets is more after market value adjustments.
Horizontal integration − Merge of companies in similar product lines.
Hostile takeover − Boards of directors don’t approve for takeover.
Identifiable assets − Tangible and intangible assets are assigned for fair value.
Statutory − Company acquires all assets of targeted company (only acquirer survives).
Net book value of assets − Book value (asset) – book value (liabilities).
Offer price − Offering a price to a share by the acquirer.
Other closing costs − Fees (legal, accounting, etc.) relates to deals.
Purchase price allocation
Restructuring charges − Charges related to repayment of early debt in restructuring.
Share exchange ratio − Offer price/acquirer’s share price.
Stock deal − Purchasing shares of targeted companies.
Stock considerations − Part of purchase price is given (form of shares) to targeted companies to acquire stock.
Subsidiary − Taking full control of the targeted company and continuing its business due to various reasons.
Synergies − combined performance and value of companies that are involved in merger and acquisition
Takeover premium − Offer price is more than the current share price of the targeted company.
Target − Company being acquired.
Timing of synergies − Time taken to realize of synergies in transaction.
Transaction closing date − Date on which the transaction is officially completed.
Vertical integration − Company mergers with another company, who are in its supply chain.
Volume weighted average price − Used as reference in takeover premium.
Black knight − Uninvited takeover bidder.
Creeping takeover − Acquiring slowly.
Dawn raid − Buys shares of targeted companies as soon as the market is opened at opening price.
Godfather offer − It is an offer which cannot be refused and is given to the targeted company.
Tender offer − Attractive price offered to the targeted company shareholders for their shares.
Crown jewels defense − Selling of valuable assets in a hostile takeover occurs.
Flip – in − Purchasing more shares at discount by shareholders.
Flip over − Shareholders can buy the company’s acquired stock at discount after the merger.
Golden parachute − Benefits given to the executives, if they are made to leave after the merger.
Greenmail − Repurchasing stock from acquirer to avoid stock falling to acquirer for premium price.
Killer bees − The targeted company hires the law firms or investment bankers to help them in hostile takeover.
Lobster trap − Restricting the conversion of convertible securities by offering huge amounts.
Poison pill − Discouraging the acquirer from pursuing the takeover.
Poison put − Making costlier for hostile takeovers by selling bonds backs at premium.
Sandbagging − Company plays with hostile bidder and waiting for white knight.
Scorched earth policy − o make takeover unattractive, targeted companies get money at high rates.
Show stopper − The targeted company makes an attempt to prevent takeover by litigations.
Supermajority amendment − Large percentage of shareholders approves company decisions.
White knight defense − Outbids black knight.
White squire defense − A friendly target company buys the sufficient shares to prevent hostile takeover. It buys shares only to prevent takeover but not to gain control.
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