What is a Voting Trust? A voting trust is an arrangement where the voting rights of shareholders are transferred to a trustee for a specified period. The shareholders are then awarded trust certificates that provide evidence that they are beneficiaries of the trust. They also retain a beneficial interest in the company’s stock and receive…
What is Financial Synergy? Financial Synergy occurs when the joining of two companies improves financial activities to a level greater than when the companies were operating as separate entities. Usually, M&A transactions result in a larger company, which has a higher bargaining power to get a lower cost of capital. Achieving a lower cost of capital as…
LBO Terms and Definitions A leveraged buyout (LBO) is the acquisition of a target company that is funded using a significant amount of debt. An LBO transaction typically occurs when a private equity (PE) firm borrows as much as they can and funds the balance with equity. An LBO model is built to enable investors…
What is a Secondary Offering? In finance, a secondary offering is when a large number of shares of a public company are sold from one investor to another on the secondary market. In such a case, the public company does not receive any cash nor issue any new shares. Instead, the investors buy and sell…
What is a Seasoned Equity Offering (SEO)? A Seasoned Equity Offering (also called a Follow On Offering) refers to any issuance of shares that follows a company’s Initial Public Offering (IPO) on the stock market. The issuance, therefore, is by a company that is already public and is coming back to the market to raise more money….
What is a Reverse Termination Fee? A reverse termination fee is also known as a reverse breakup fee. It refers to the amount of money paid to the target company after the acquirer backs out of the deal or the transaction fails to complete. Usually, the reverse termination fee is included in the acquisition agreement,…
What is an Equity Kicker? An equity kicker is an equity incentive where the lender provides credit at a lower interest rate and, in exchange, gets an equity position in the borrower’s company. An equity kicker is structured as a conditional reward, where the lender gets equity ownership that will be paid at a future…
What Does Synergistic Mean? The term synergistic is derived from synergy, which refers to the benefit that results from the merger of two agents who want to achieve something that neither of them would be able to achieve on their own. The term is mostly used in mergers and acquisitions (M&A), where two companies merge…
What does Consideration mean? The term “consideration” is a concept in English law that refers to the price paid in exchange for the fulfillment of a promise. The court in the case of Currie v Misa defined consideration as a right, interest, profit, detriment, loss, or responsibility. Its main characteristic is that the promissor must…
