Synergy
Gain from the combination of two businesses that is greater than the sum of either of the two businesses independently. Tweet
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Supermajority Provision
Form of acquisition defense that raises the minimum number of votes required for approval of a merger (e.g., to two-thirds or three-quarters of outstanding shares), implying that a hostile acquirer needs more than 50 percent of the votes to effect a change in control. Tweet
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Standstill Agreement
Agreement by which the acquirer agrees not to purchase shares of the target for a specified period of time. Tweet
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Spin Off
Organize business unit as a separate entity and sell a minority of shares. This creates economic value for the parent company while retaining control. Tweet
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Sovereign Wealth Fund
State-owned investment fund often funded by central banks, who accumulate the funds in the course of their fiscal management of a nation’s banking system (foreign currency reserves, currency stabilization, etc). Tweet
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Real Option Synergies
Options that create flexibility for managers or extract commitments from others. The following are considered Real Option Synergies: Growth Options, Exit Options, Options to Defer, Options to Alter Operating Scale, Options to Switch. Tweet
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Political Risk
Component of Cross-Border Effects Analysis. Political Risk considers the probability a government will intervene to the detriment of the corporation by way of regulation, punitive tax policies, restriction on cash policies, expropriation of assets, etc. Many use the Sovereign Debt Credit Rating as a proxy for political risk. Tweet
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Poison Pill
Defense against a hostile acquisition which enacted by the board of directors provides shareholder the right to purchase common shares at a nominal cost upon the occurrence of a triggering event such as the acquisition of more than 10% of the company’s shares by a single party, partnership, or group. Tweet
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Operating Synergy
Operational benefit derived from a merger or acquisition. Operating Synergies usually take the form of greater efficiency from superior utilization of assets. Tweet
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