Fair Price Amendment
What is a Fair Price Amendment? A fair price amendment is a provision contained in a public company’s charter that requires potential acquirers of the company to pay “a fair price” in order to acquire shares held by the company’s stockholders. The formula for calculating the fair market price that bidders should pay is provided...
Bear Hug
What is a Bear Hug? A bear hug is a hostile takeover strategy where a potential acquirer offers to purchase the stock of another company for a much higher price than what the target is actually worth. The acquirer makes a generous offer to acquire the company at a price that exceeds what other bidders...
Motives for Mergers
What are the Different Motives for Mergers? Companies pursue mergers and acquisitions for several reasons. The most common motives for mergers include the following: 1. Value Creation Two companies may undertake a merger to increase the wealth of their shareholders. Generally, the consolidation of two businesses results in synergies that increase the value of a...
Lobster Trap
What is a Lobster Trap? A lobster trap is a strategy that target companies utilize in the event of a hostile takeover attempt. The strategy involves the use of a charter issued by the target company with a directive that prevents shareholders with more than 10% of convertible securities – which includes warrants, convertible bonds,...
Cash Offer
What is a Cash Offer? A cash offer refers to an all-cash offer made by a purchaser to the seller of a real estate property. The purchaser does not need a mortgage or any other type of financing to complete the transaction and is willing to pay cash to close the transaction. A cash buyer...
Merger Monday
What is Merger Monday? Merger Monday refers to the practice by companies of announcing major mergers and acquisitions on a Monday. The involved parties finalize the details of the deal over the weekend and make the announcement first thing on Monday morning. The goal is, of course, to pass on the information about the joining...
Section 338
What is Section 338? The United States Congress enacted Section 338 in 1982 to allow taxpayers to treat certain qualified stock purchases as asset acquisitions for federal income tax purposes. Section 338 provides two elections: the so-called “regular Section 338 election” under Section 338(g), and the other under Section 338(h)(10). These elections treat a stock...
Calendarization
What is Calendarization? The process of standardizing the reporting time periods of financial statements is called calendarization. To make comparable companies “equal,” the financial data of each company must be standardized so that there is a fair basis for comparison. For example, if you are examining a set of companies with fiscal years ending March 31,...
Repo 105
What is Repo 105? Repo 105 is an accounting gimmick that was used within Lehman Brothers to classify short-term loans as a sale. It is a form of repurchase agreement that allows companies to borrow the excess funds of other companies for a short duration in exchange for collateral. The borrower promises to pay back the...
Analyst Recommendations
What are Analyst Recommendations? Analyst recommendations are recommendations and advice given by financial analysts and investment researchers to their clients with regards to what assets to invest in and what assets not to invest in. Financial analysts usually conduct extensive research on a specific asset class and also on the overall state of the financial...
