CONCEPTS BUILDER!!!

A friendly takeover consists of a straight buyout of a company, and happens frequently. The shareholders receive cash or (more commonly) an agreed-upon number of shares of the acquiring company's stock.

A hostile takeover occurs when a company attempts to buy out another whether the management of the target company likes it or not. A hostile takeover can usually occur only through publicly traded shares, as it requires the acquirer to bypass the board of directors and purchase the shares from other sources. This is difficult unless the shares of the target company are widely available and easily purchased (i.e., they have high liquidity). A hostile takeover may presage a corporate raid.

A reverse takeover can occur in different forms:

• a smaller corporate entity takes over a larger one.
• a private company purchases a public one.
• a method of listing a private company while bypassing most securities regulations, in which a shell public company buys out a functioning private company whose management then controls the public company.

Poison Pill - In business, poison pills (usually known by their more formal name, "shareholder rights plans"), are often used to avoid takeover bids. These are attempts by a potential acquirer to obtain a control block of shares in a target company, and thereby gain control of the board and, through it, the company's management. There are several types of "poison pills" that can be planned by a company that thinks it may be the target of a takeover by a potential acquirer, but the conventional poison pill is now generally as follows:

The target issues rights to acquire a large number of new securities, usually common stock or preferred stock, to existing shareholders. These new rights usually allow holders (other than an acquirer) to convert the right into a large number of common shares if anyone acquires more than a set amount of the target's stock (typically 10-20%). This immediately dilutes the percentage of the target owned by the acquirer, and makes it more expensive to acquire control of the target. This form of poison pill is sometimes called a shareholder rights plan because it is intended to give management (and possibly shareholders) the right to approve an acquisition, potentially requiring the acquirer to pay a premium for control of the target. Because the board of directors of the company can redeem or otherwise eliminate a standard poison pill, a standard poison pill does not typically block or impeded a proxy fight or other takeover not accompanied by an acquisition of a significant block of the company's stock.
"Poison pill" is also used more broadly to describe other types of takeover defenses that involve the target taking some action that harms both target and bidder:

The target adds to its charter a provision which gives the current shareholders the right to sell their shares to the acquirer at an increased price (usually 100 % above recent average share price), if the acquirer's share of the company reaches a critical limit (usually one third). This kind of poison pill cannot stop a determined acquirer but ensures a high price for the company.

The target takes on large debts in an effort to make the debt load too high to be attractive--the acquirer would eventually have to pay the debts.
The company buys a number of smaller companies using a stock swap, diluting the value of the target's stock.

The target grants its employees stock options that immediately vest if the company is taken over. This is intended to give employees an incentive to continue working for the target company at least until a merger is completed instead of looking for a new job as soon as takeover discussions begin. However, with the release of the "golden handcuffs", many discontent employees may quit immediately after they've cashed in their stock options. This poison pill may create an exodus of talented employees. In many high-tech businesses, attrition of talented human resources often means an empty shell is left behind for the new owner.

Peoplesoft guaranteed its customers in June 2003 that if it were acquired within two years, presumably by its rival Oracle Corporation, and product support were reduced within four years, its customers would receive a refund of between two and five times the fees they had paid for their Peoplesoft software licenses. The hypothetical cost to Oracle was valued at as much as US$1.5 billion. The move was opposed by some Peoplesoft shareholders who believed the refund guarantee flagrantly opposed their interests as shareholders. Peoplesoft allowed the guarantee to expire in April 2004.

BSE Sensex - The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE.

The base value of the Sensex is 100 on April 1, 1979 and the base year of BSE-SENSEX is 1978-79.

At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions.

TURNAROUND : A turnaround occurs when a company takes successful steps to correct a period of deteriorating financial performance.

SMALL-CAP STOCK : Small-cap is a term that refers to a company with a market capitalization (calculated by taking a firm's current share price and multiplying that figure by the total number of shares outstanding) near the low end of the publicly traded spectrum. Small-cap firms have market values larger than micro-cap companies, but smaller than those in the mid-cap sector. The boundaries that separate these classifications are not clearly defined and can vary according to the source. Generally, though, the term "small-cap" is used to describe

Equity Value - Equity value is a market-based measure of the value of a firm. It accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity. Equity value differs from market capitalization in that it incorporates all equity interests in a firm whereas market capitalization only reflects those common shares currently outstanding.

Enterprise Value - Enterprise value (sometimes Total enterprise value, or TEV) is a market-based measure of a company's value. It's mainly market cap + debt. If you buy the company you buy the debt load.

Enterprise value = market capitalization + debt + minority interest + preferred equity - cash and cash equivalents

BASIS POINTS :A basis point is the smallest measure used in quoting yields on fixed income products. You will also hear basis points mentioned when the financial media releases reports on interest rates. The important thing to understand is that one basis point is equal to one one-hundredth of one percentage point (0.01%). Therefore, 100 basis points would be equivalent to one full percent.

JUNK BOND : A junk bond is a fixed-income security that is rated below investment grade by one or more of the major bond ratings agencies. Bonds often receive this type of low rating when the corporation, municipality or other entity that issued the bond is facing financial trouble. In these cases, the credit risk on the bonds is fairly high -- in other words, there is a relatively decent chance that the junk bond issuer will have trouble fulfilling its repayment obligations (including interest and principal).

Convertible Bond - A convertible bond is type of bond that can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. A convertible bond will typically have a lower coupon rate for which the holder is compensated for by the value of the holder's ability to convert the bond into shares of stock. In addition, the bond is usually convertible into common stock at a substantial premium to its market value.

Other convertible securities include exchangeable bonds -where the stock underlying the bond is different from that of the issuer, convertible preferred stock (similar valuation-wise to a bond, but lower in seniority in the capital structure), and mandatory convertible securities (short duration securities, generally with high yields, that are mandatorily convertible upon maturity into a variable number of common shares based on the stock price at maturity).

Bull market
A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of further capital gains. The longest and most famous bull market was in the 1990s when the U.S. and many other global financial markets grew at their fastest pace ever.

In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially relevant to participants in bull markets since bulls are herding animals. A bull market is also described as a bull run. Dow Theory attempts to describe the character of these market movements.

Bear market
A bear market tends to be accompanied by widespread pessimism. Investors anticipating further losses are motivated to sell, with negative sentiment feeding on itself in a vicious circle. The most famous bear market in history was the Great Depression of the 1930s.

Prices fluctuate constantly on the open market; a bear market is not a simple decline, but a substantial drop in the prices of a range of issues over a defined period of time. By one common definition, a bear market is marked by a price decline of 20% or more in a key stock market index from a recent peak over at least a two-month period. However, no consensual definition of a bear market exists to clearly differentiate a primary market trend from a secondary market trend.