Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
| Amalgamations | Combinations of firms that have been joined by merger, consolidation, or acquisition.
(See Refer to page 765)
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| Circular Bid | Corporate takeover bid that is communicated to the stockholders by direct mail.
(See Refer to page 766)
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| Consolidation | A merger in which an entirely new firm is created and both the acquired and acquiring firm cease to exist.
(See Refer to page 765)
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| Control Block | An interest controlling 50 percent of outstanding votes plus one; thereby it may decide the fate of the firm.
(See Refer to page 784)
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| Corporate Governance | Rules and practices relating to how corporations are governed by management, directors, and shareholders.
(See Refer to page 784)
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| Diversification | Investment in more than one asset, whose returns do not move proportionally in the same direction at the same time thus reducing risk.
(See Refer to page 781)
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| Earnings Per Share | Net income minus any cash dividends on preferred stock, divided by the number of shares of common stock outstanding.
(See Refer to page 780)
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| Going-Private Transactions | All publicly owned stock in a firm is replaced with complete equity ownership by a private group.
(See Refer to page 768)
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| Greenmail | A targeted stock repurchase where payments are made to potential bidders to eliminate unfriendly takeover attempts.
(See Refer to page 785)
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| Leveraged Buyouts (LBO) | Going-private transactions in which a large percentage of the money used to buy the stock is borrowed. Often, incumbent management is involved.
(See Refer to page 768)
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| Merger | The complete absorption of one company by another, where the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity.
(See Refer to page 765)
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| Poison Pill | A financial device designed to make unfriendly takeover attempts unappealing, if not impossible.
(See Refer to page 786)
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| Proxy Contests | Attempts to gain control of a firm by soliciting a sufficient number of stockholder votes to replace existing management.
(See Refer to page 767)
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| Shareholder Rights Plan | Provisions allowing existing shareholders to purchase stock at some fixed price should an outside takeover bid take place, discouraging hostile takeover attempts.
(See Refer to page 787)
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| Stock Exchange Bid | Corporate takeover bid communicated to the stockholders through a stock exchange.
(See Refer to page 766)
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| Synergy | The positive incremental net gain associated with the combination of two firms through a merger or acquisition.
(See Refer to page 772)
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| Tender Offer | A public offer by one firm to directly buy the shares from another firm.
(See Refer to page 766)
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2002 McGraw-Hill Higher Education