Definition: The Equity Carveout is the corporate strategy wherein the company sells a portion or a division in a wholly owned subsidiary through the IPOs and retain the full control over the management. Under this arrangement, limited shares are offered to the public, while the majority stake is retained by the parent company. Usually, more than 50% shares are held by the … [Read more...] about Equity carveout
Demerger
Definition: Demerger is the business strategy wherein company transfers one or more of its business undertakings to another company. In other words, when a company splits off its existing business activities into several components, with the intent to form a new company that operates on its own or sell or dissolve the unit so separated, is called a demerger. A demerged … [Read more...] about Demerger
Partial Sell-offs
Definition: The Partial Sell-offs is the form of divestiture wherein the firm sells its business unit or a subsidiary to another because it deemed to be unfit with the company’s core business strategy. Generally, the partial sell-offs decisions are taken to fulfill one of the following business motives: The most common motive for the sell-off is to raise capital and … [Read more...] about Partial Sell-offs
Divestiture
Definition: The Divestiture means the sale or disposition of certain company’s assets or a business unit which is not performing well and is disposed of either through closure, sale or bankruptcy. Thus, the divestiture involves some kind of contraction and is based on the principle which says 5-3 = 3! opposite of the principle of merger & acquisition which says, 2+2 = … [Read more...] about Divestiture
Anti-Takeover Defenses
Definition: A takeover is a form of an acquisition, wherein the company offers a bid for the purchase of a certain block of the equity of another company (target) to exercise complete control over its affairs. Practically, the acquirer must buy at least 51% or more paid up equity of the acquired company to enjoy full control over its operations. A Takeover can either be … [Read more...] about Anti-Takeover Defenses
Translation Exposure
Definition: The Translation Exposure or Accounting Exposure is the risk of loss suffered when stock, revenue, assets or liabilities denominated in foreign currency changes with the movement of the foreign exchange rates. In other words, the translation exposure stems from the requirement of converting the subsidiary’s assets and liabilities (operating in another country) … [Read more...] about Translation Exposure
Operating Exposure
Definition: The Operating Exposure refers to the extent to which the firm’s future cash flows gets affected due to the change in the foreign exchange rates along with the price changes. In other words, a risk that firm’s revenue will be adversely affected due to the substantial change in the exchange rate and the inflation rate is called as operating exposure. Operating … [Read more...] about Operating Exposure
Transaction Exposure
Definition: The Transaction Exposure is a kind of foreign exchange risk involved in the international trade wherein the cross-currency transactions (multiple currencies) are involved. In other words, a risk faced by the company that while dealing in the international trade, the currency exchange rates may change before making the final settlement, is termed as a transaction … [Read more...] about Transaction Exposure
Foreign Exchange Exposure
Definition: Foreign Exchange Exposure refers to the risk associated with the foreign exchange rates that change frequently and can have an adverse effect on the financial transactions denominated in some foreign currency rather than the domestic currency of the company. In other words, the firm’s risk that its future cash flows get affected by the change in the value of the … [Read more...] about Foreign Exchange Exposure
Staggered Board
Definition: The Staggered Board is the board comprising of three equal classes of the board of directors who are elected on an annual basis. In other words, the staggered board is the governance practice in which certain members, generally one-third of the total board of directors are elected each year, rather than all at once. The major advantage of a staggered board over … [Read more...] about Staggered Board