What is a Key Man Clause? A key man clause is a contractual clause that prohibits an investment firm or fund manager from making new investments if one or more key persons are not available to devote the necessary time to the investment. A key man is an important employee or executive who is critical…
What is Quality of Earnings? A quality of earnings report is a routine step in the due diligence process for private acquisitions. The report assesses how a company accumulates its revenues – such as cash or non-cash, recurring or nonrecurring. Net income is not necessarily a 100% accurate indication of financial performance for a business….
What is a Joint Venture (JV)? A joint venture (JV) is a commercial enterprise in which two or more organizations combine their resources to gain a tactical and strategic edge in the market. Companies often enter into a joint venture to pursue specific projects. The JV may be a new project with similar products or…
What is the Pac-Man Defense? The Pac-Man Defense is a strategy used by targeted companies to prevent a hostile takeover. This takeover prevention strategy is implemented by the target company turning things around by trying to take over the acquirer. The purpose of the Pac-Man Defense, as with any defensive strategy against a hostile takeover,…
What is the Crown Jewel Defense? The Crown Jewel Defense strategy in mergers and acquisitions (M&A) is when the target company of a hostile takeover sells its most valuable assets to reduce its attractiveness to the hostile bidder. The crown jewel defense is a last-resort defense since the target company will be intentionally destroying part…
What is a Subsidiary Merger? A subsidiary merger is a type of merger that occurs when the acquiring company uses its subsidiary company to acquire a target company. The acquirer may create a subsidiary company or use one of its existing subsidiary companies to execute the merger and acquisition transaction. In a subsidiary merger, the…
What is a Giffen Good? A Giffen good, a concept commonly used in economics, refers to a good that people consume more as the price rises. Therefore, a Giffen good shows an upward-sloping demand curve and violates the fundamental law of demand. It is important to note that all Giffen goods are inferior goods, but…
What is the Philosophy of Accounting? The philosophy of accounting encompasses the general rules, concepts, and ideas surrounding the preparation and auditing of the accounts and financial statements of individuals or companies. Due to the legal ramifications of inaccurate or falsified financial documentation, one of the most fundamental parts of the philosophy is the need…
What is Private Equity Crowdfunding? Private equity crowdfunding refers to the practice of generating funding through the sale of securities such as shares, debts, and convertible notes. It is a new and increasingly popular way for entrepreneurs, early-stage companies, or small businesses to obtain funding. In private equity crowdfunding, the investor secures equity interest or…
What is the Just in Time (JIT) Method? The Just in Time (JIT) style of inventory management – also sometimes referred to as the Toyota Production System (TPS) – is a strategy of managing inventory and/or production that links the ordering of raw materials to production scheduling. It differs from other strategies of inventory maintenance….
