Definition: The Poison Pill is the anti-takeover tactic adopted by the firm to discourage a hostile takeover, by making the stock unfavorable for the corporate raider, who has given the hostile bid. Poison Pill Strategies Flip in: This strategy enables the existing shareholders of the target company to buy additional shares at a high discount rate. This poison … [Read more...] about Poison Pill
White Knight
Definition: The White Knight is any friendly investor or a company that rescues a firm from the prospects of a hostile takeover. In other words, white knight means, any company or an individual that acquires the company standing at the extremity of being taken over by the undesired forces, often called as black knights. A white knight is a savior of the company who helps in … [Read more...] about White Knight
Greenmail
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
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
National Financial Switch
Definition: The National Financial Switch is the largest interconnected network of automated teller machines (ATMs) in India. This system was developed by Institute of development and research in Banking Technology (IDRBT), Hyderabad. The national financial switch enabled the interconnectivity between the bank’s switches such that the transactions made at any ATM could be … [Read more...] about National Financial Switch
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