Finance Terminologies

Asset Stripper Explained

financewatch — Sat, 23 May 2009 10:20:59 +0000

This is a corporate purchaser who discovers companies, which will create more profit by liquidating the parts rather than through business operations.

For example an asset stripper could purchase a battery company for $100 million, strip and sell the R&D division for $30 million, then sell the remaining company for $85 million, for a profit of $15 million.The asset stripper could also just sell a portion of the business to fulfill debt obtained from acquiring the company.

What Is Cash Flow Financing?

financewatch — Fri, 15 May 2009 10:17:24 +0000

It’s also known as Cash Flow Loan, and is a form of financing in which the loan is backed by a company’s expected cash flows. This differs from an asset-backed loan, where the collateral for the loan is based on the company’s assets.

The schedules or repayments for cash-flow loans are based on the company’s projected future cash flows. Debt covenants on these loans are typically focused on adequate levels of EBITDA growth and margins, as well as manageable levels of interest expenses.

What Is Blue Sky Law?

financewatch — Mon, 13 Apr 2009 12:18:55 +0000

According to Investopedia, “The term is said to have originated in the early 1900s when a Supreme Court justice declared his desire to protect investors from speculative ventures that had “as much value as a patch of blue sky.

State regulations designed to protect investors against securities fraud by requiring sellers of new issues to register their offerings and provide financial details. This allows investors to base their judgments on trustworthy data.

A Quick Overview Of Mergers & Acquisitions

financewatch — Mon, 02 Feb 2009 08:56:10 +0000

Hi,

I didn’t know the details and had to undergo long long pages. So finally here found the conclusion. Here it goes:

A merger can happen when two companies decide to combine into one entity or when one company buys another. An acquisition always involves the purchase of one company by another.
The functions of synergy allow for the enhanced cost efficiency of a new entity made from two smaller ones – synergy is the logic behind mergers and acquisitions.
Acquiring companies use various methods to value their targets. Some of these methods are based on comparative ratios – such as the P/E and P/S ratios – replacement cost or discounted cash flow analysis.
An M&A deal can be executed by means of a cash transaction, stock-for-stock transaction or a combination of both. A transaction struck with stock is not taxable.
Break up or de-merger strategies can provide companies with opportunities to raise additional equity funds, unlock hidden shareholder value and sharpen management focus. De-mergers can occur by means of divestitures, carve-outs spinoffs or tracking stocks.
Mergers can fail for many reasons including a lack of management foresight, the inability to overcome practical challenges and loss of revenue momentum from a neglect of day-to-day operations.