What is a Friendly Takeover? In M&A transactions, a friendly takeover is the acquisition of a target company by an acquirer/bidder with the consent or approval of the management and board of directors of the target company. A friendly takeover is the opposite of a hostile takeover. The latter is a type of acquisition in…
What is Strategic vs. Financial Buyer? The question of Strategic vs Financial Buyer typically comes up when a company is being sold, as in M&A or LBOs. A strategic buyer is typically after horizontal or vertical expansions, looking for strategic synergies that will improve their operations. Their primary objective is to identify a business whose…
What is Net Asset Liquidation? Net asset liquidation or net asset dissolution is the process by which a business sells off its assets and ceases operations thereafter. Net assets are the excess value of a firm’s assets over its liabilities. However, the revenue generated by the sale of the net assets in the market might…
What is a Poison Put? A poison put is a defense strategy against a hostile takeover. It involves the issuance of bonds by the target company that can be bought back prior to their maturity date. The poison put defense is a pre-offer defense mechanism and can be considered a variant of the poison pill…
What is an Arm’s Length Transaction? An arm’s length transaction, also known as the arm’s length principle (ALP), indicates a transaction between two independent parties in which both parties are acting in their own self-interest. Both buyer and seller are independent, possess equal bargaining power, are not under pressure or duress from the opposing party,…
What is Book Value vs Fair Value? In accounting and finance, it is important to understand the differences between book value vs fair value. Both concepts are used in the valuation of an asset, but they refer to different aspects of an asset’s value. In this article, we will discuss book value vs fair value in…
What is a Scorched Earth Policy? In finance, a scorched earth policy is a tactic that a company can use to prevent a hostile takeover. Essentially what happens is that a company targeted for takeover does everything it can reasonably do to make itself unattractive, hopefully discouraging the potential acquirer from continuing the takeover attempt….
What is a Godfather Offer? A Godfather offer is essentially an offer that is so ridiculously favorable, that to refuse it would be a dereliction of financial responsibility. It most often occurs in the context of mergers and acquisitions, and refers to an offer made by one company to purchase or take over another company….
What is a Dawn Raid? A dawn raid refers to the sudden sweeping purchase by a potential acquirer of a substantial number of a target company’s shares the moment the market opens (“dawn”). A dawn raid is typically undertaken by a potential acquiring company in the context of a hostile takeover attempt. Hostile…
What are American vs European vs Bermudan Options? There are different types of options that differ in terms of their exercise restrictions. The three basic types are American, European, and Bermudan options. Let’s explore American vs European vs Bermudan options to find out how they are different from one another. Options are exactly what they…
