The following is a glossary which defines terms used in mergers, acquisitions, and takeovers of companies, whether private or public.
Acquisition When one company is taking over controlling interest in another company. Amalgamation When two or more separate companies join together to form one company so that their pooled resources generate greater common prosperity than if they remain separate. Backward Integration This is a process by which a company acquires another company that produces the raw material or the ancillaries which are used by the former. This type of takeover guarantees, to a certain extent, an uninterrupted supply of raw materials and components at fair prices. Bear Hug It is used in takeover situations. It is an indication to the board of a target company that an offer of takeover is under consideration. A strong bear hug is a formal notice to the target company of an intended takeover. A teddy bear hug is an indication from a target company that it will favorably consider a takeover, but at a higher price than offered. Black Knight An unwelcome takeover bidder. Bootstrap acquisition This term is used in connection with a friendly takeover. When threatened with a hostile takeover, the target company exchanges some of its assets for shares held by dissident shareholders. Later on, the target company sells itself to a friendly acquirer who gets 100% of the target company for less than what it would have paid otherwise. The target company has virtually helped finance part of the takeover. Creeping Takeover It is a slow interceptive acquisition of the controlling interest in a company by buying its shares in the stock market over a period of time. Dawn Raid A takeover attempt by an individual or a company in which instructions are given to buy all available shares of the target company at current market price as soon as stock exchange is opened for business on a particular date. With this base the bidder makes an attractive offer to the other shareholders in order to make a full takeover bid. Forward Integration It is a process by which a company acquires another company that make use of its products to manufacture finished goods. This type of acquisition can go up to the point of retail outlets. Godfather Offer A takeover offer so attractive that the target company can not refuse. Usually this type of takeovers result in a change of the management team. Shareholders too, sometimes have reasons to assume that the takeover will serve some ulterior motive of the predator (such as asset stripping, transfer of reserves) rather than uphold their interest. A godfather offer has none of these nasty implication. Golden Parachute An employment contract offered to company directors and senior management which guarantees to pay extensive benefits if the executives is made to leave the company. Such contracts are offered to make unfriendly takeovers expensive. Greenmail To buy a large number of shares of a company with either of the two motives; to sell them at a higher rate to a corporate raider, or to offer them to the company for a similar profit. An offer which the management will find hard to refuse as its sale to the raider will threaten its existence. Grey Knight A takeover bidder whose intentions are unclear. He is neither a welcome bidder known as the white knight nor clearly an unwelcome bidder, known as the black knight. Hired Gun An expert who is hired by a takeover target company to fight off a predator. Hostile Takeover Takeover of a company by an individual, a group or another company which is not welcomed or approved by the management of the target company or its corporate philosophy. Such a takeover is resisted by the target company, using many ploys like the golden parachute, poison pill, or shark repellent. Killer bees Law firms, public relations firms, and investment bankers employed by a target company to fend off unfriendly takeover. Lobster Trap The anti-takeover strategy that involves restrictions in the charter on the acquisition of voting stock by individuals with a large percentage of the convertible securities, named for the trap that is designed to hold large lobster, while permitting small ones to escape. In particular, stipulating that a convertible debenture holder can not convert his debentures into equity shares if he already holds, or going to hold as a result of the conversion, 10% or more of the company's equity shares. Megabid A very large takeover bid. Merger An amicable involvement of two or more companies to form one unit, and to increase overall efficiency. The shareholders of merged companies are offered equivalent holdings in the new company, and old employees are generally retained. Takeovers, which are quite another matter, generate a lot more heat.