Summary: Advanced Finance

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• 1 Week 1 M&A

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• Explain how to recognise a hostile takeover

  Management against the M&A or not included in the bidding

• Explain how Golden Parachute will work as defence mechanism?

  This is a strategy in which management signs contracts to award themselves  huge compensation, making the takeover unattractive.

• Explain how White knight will work as defence mechanism?

  This is a strategy in which management intentionally go for a more friendly or a suitable company to take over.

• Explain how Pacman defense will work as defence mechanism? Then explain the risk associated with this strategy.

  This is a strategy in which the TC buys the bidding company. 
  The risk associated with this strategy is that, it is very expensive. 

• Explain how Management buy-out, Leverage recapitalisation & Greenmail will work as defence mechanism?

  Management buy-out: When management realises a company wants to buy them, the management rather buys shares of the TC company themselves.
  Leverage recapitalisation: Management borrrowing or increasing their debts positions to finance cash dividends, hence making the company unattractive for takeover.
  Greenmail: Inward strategy. Management privately negotiating with some of the shareholders in the TC  by repurchasing their shares at premium price in order to have the majority control of the company.

• Explain how Sale of Crown jewel will work as defence mechanism?

  This happens when a company sells most of its valuable assets to make the takeover unattractive.

• Explain how lawsuit will work as defence mechanism?

  Management files lawsuit against shareholders of the TC so that they wouldn't have higher voting anymore in order to complete a takeover.

• What is the rule of the HHI?

  Before HI is < or = 0.1 we say Meger is not a problem.
  Before 0,1 < HI < 0,2 we calculate the DELTA and if Delta is < 0,025 we say Merger is not a prolem. 
  Before HI > 0,2 we calculate DELTA and if the Delta is < 0,015 we say Merger is not a big problem. 
  IN EVERY OTHER CASE MERGER IS MOST LIKELY NOT ALLOWED. 

• Explain in simple terms what is merger and acquisition?

  Merger: when 2 companies combine 
  
  Acquisition: One company buys another. 

• What do we mean when we say M&A is generally defined as a corporate restructuring?

  This means having a major change in a companys structure or operations in order to improve business, grow or survive tough competition.