Definition: The Greenmail is the anti-takeover tactic undertaken when the target firm buys back its own shares at an inflated price from the unfriendly firm which possesses a large stock of the target company and is threatening a hostile takeover. In other words, the money given by the target firm to another company, called as a corporate raider to buy back its own shares in … [Read more...] about Greenmail
Finance
Pac-Man Defense
Definition: The Pac-Man Defense is a defensive mechanism used against the hostile takeover, wherein the target firm turns around the table and acquires the firm that has made the hostile bid or has initiated the takeover. In other words, a defensive strategy in which the firm facing the threat of hostile takeover “turns the tables” by acquiring its would-be buyer. This … [Read more...] about Pac-Man Defense
Golden Parachute
Definition: The Golden Parachute is an agreement between the company and the top executive(s), that he will be paid lucrative benefits in the event when a company is taken over by the other firm, and his employment gets terminated, as a consequence of merger or acquisition. In other words, golden parachute is a clause in the employment contract, generally of top key … [Read more...] about Golden Parachute
External Commercial Borrowings
Definition: The External Commercial Borrowings or ECBs is the financial instrument used to borrow money from the foreign sources of financing to invest in the commercial activities of the domestic country. Simply, borrowing money from the non-resident lenders and investing it in the commercial activities of India is called as external commercial borrowings. The external … [Read more...] about External Commercial Borrowings
Seed Capital
Definition: The Seed Capital is the initial money required to start a new business. Simply, the initial funding required to start the operations of a new business is termed as a seed capital. Generally, the initial capital comes from the company’s founder personal assets or from friends, family or angel investors (the wealthy individuals who provide capital with some … [Read more...] about Seed Capital
Greenshoe Option
Definition: The Greenshoe Option is a special provision in the underwriting agreement that allows the underwriter to sell more shares to the investors, than what has been planned by the issuer in the initial public offerings (IPOs). In other words, Greenshoe option allows the underwriters or the syndicates (investment banks or brokerage agencies) to buy up to an additional … [Read more...] about Greenshoe Option
Insider Trading
Definition: The Insider Trading means, buying and selling off public company’s stock shares by a person who have an access to the material non-public information. The insider trading might be legal or illegal depending on the trading being done as a result of publicly disclosed information or on the basis of non-disclosure of material information to the public. In insider … [Read more...] about Insider Trading
Leveraged Buyout
Definition: Leveraged Buyout or LBO is the transaction wherein the acquisition of another company or a single asset is financed through the combination of equity and the significant amount of debt or borrowed funds. In other words, Leveraged buyout is the acquisition of another company by using the debt as the major or primary source of financing. Usually, the ratio used in … [Read more...] about Leveraged Buyout
Autonomous Investment
Definition: The Autonomous Investment is the capital investment which is independent of the economy shifts. This means, any change in the cost of raw material or any change in the salary and wages of labor etc. has no effect on the autonomous investment. The autonomous investment is made for the welfare of the society and not for generating profits out of such investments. … [Read more...] about Autonomous Investment
Induced Investment
Definition: The Induced Investment is a capital investment that is influenced by the shifts in the economy. These investments are made with the intention to generate profit out of such investments. The change in the cost of raw material, change in the tastes and preferences of customers, increase in the lending or borrowing rates, etc., have a direct impact on the induced … [Read more...] about Induced Investment