Corporate finance

Confidential Engagement Between Activists and Boards Before going public, activists often approach boards privately under confidentiality agreements to negotiate behind closed doors—a phase where leverage is subtle and information rules matter.

Consent Solicitation How shareholders grant corporate actions by written consent between annual meetings, enabling activist pressure without waiting for the proxy vote.

Contribution Analysis A fairness assessment in share-exchange deals comparing each party's revenue, EBITDA, and equity contribution to validate the implied valuation ratio.

Control Share Acquisition Statute State laws that suspend voting rights of shares purchased above ownership thresholds until disinterested shareholders approve the acquisition.

Control Share Statute vs Poison Pill: How They Compare A control-share statute strips voting rights unless shareholders approve; a poison pill dilutes the acquirer's stake. Both block takeovers but use opposite mechanisms: statutory versus contractual, and disenfranchisement versus dilution.

Controlled Company Exemption How the controlled company exemption lets majority-owned firms skip independent-director rules for compensation and nominating committees, and what it means for minority shareholders.

Corporate Culture Activism Activist campaigns targeting a company's internal practices—particularly workplace diversity, inclusion, environmental policies, and governance reform—often led by stakeholders or short-term shareholders.

Corporate Debt Structure The mix of senior, subordinated, and convertible debt in a company's capital stack and its implications for risk.

Corporate Governance Rating Third-party assessment of a company's governance practices, board structure, and risk controls used by institutional investors.

Corporate Purpose Statement and Governance Corporate purpose statements signal stakeholder values but raise questions about fiduciary duty, liability, and accountability when actual conduct diverges from stated purpose.

Covenant Breach at an LBO Portfolio Company What happens when an LBO company breaches debt covenants: waiver requests, amendment fees, equity cures, and restructuring options.

Covenant-Lite Loans in Leveraged Buyouts Explained Covenant-lite loans reduce borrower restrictions in LBOs, giving sponsors flexibility but exposing lenders to greater default risk. Why PE firms prefer them and what they mean for investors.

Creeping Takeover How an acquirer accumulates a controlling stake through gradual open-market purchases, potentially avoiding disclosure thresholds and formal bid requirements.

Cross-Default Clause Debt covenant triggering default across multiple obligations if the borrower defaults on any single debt instrument.

Crown Jewel Defense A crown jewel defense is a takeover strategy in which a target company threatens to sell or divest its most valuable asset—the 'crown jewel'—to a third party if a hostile bidder acquires it.

Crown Jewel Defense Against Hostile Takeovers A hostile takeover defense in which a company sells or options its most valuable assets to deter an unwanted bidder and attract potential white knights.

Cumulative Voting Shareholder voting method that allows each shareholder to cast all eligible votes for a single director, enabling minorities to concentrate power.

De-SPAC Transaction A de-SPAC transaction is the merger of a special-purpose acquisition company (SPAC) with a private operating company, resulting in the private company becoming publicly listed. De-SPAC mergers have become a major route to public markets.

Dead-Hand Poison Pill A dead-hand poison pill is a shareholder rights plan that cannot be redeemed by directors elected through a hostile takeover. Only the original board can redeem it, forcing a hostile acquirer to negotiate or face permanent dilution.

Dead-Hand vs Slow-Hand Poison Pill: Key Differences Understand dead-hand vs slow-hand poison pills. Dead-hand prevents new board from redeeming the pill; slow-hand allows redemption but only after a delay. Both deter acquirers.

Deal Contingency Condition in an M&A agreement allowing the buyer to withdraw or renegotiate if circumstances are not satisfied before closing; key protector of buyer risk.

Deal Protection Devices in M&A Deal protection devices in merger agreements include no-shop, matching rights, termination fees, and force-the-vote clauses that shield signed deals from rivals.

Deal Spread in Risk Arbitrage The deal spread is the gap between a merger's offer price and its current stock price; arbitrageurs buy it to capture deal-completion premiums.

Deal Synergies Cost and revenue synergies created by combining two companies; how they are estimated, shared, and why they are chronically overestimated.

Debt Covenant Types Affirmative and negative constraints imposed by lenders on borrowers to protect creditors and control financial risk.

Debt Maturity Profile The schedule of when a company's outstanding debt obligations come due, spread across multiple years to manage refinancing risk and maintain financial flexibility.

Debt-Funded Share Repurchases: Mechanics and Risks When a company borrows to fund share repurchases, it trades financial leverage for reduced share count. Learn how this changes earnings per share, financial ratios, and what happens if earnings fall.

Declassified Board Campaign Shareholder activism to eliminate staggered board terms and require all directors to stand for annual election.

Defending Against a Bust-Up Takeover What a bust-up takeover is and which defenses—crown jewel lockups, asset sales, recapitalizations—best protect companies against bids motivated by breaking up and selling divisions.

Defensive Recapitalization as a Takeover Defense Defensive recapitalization makes a target less attractive to hostile acquirers by loading up debt, paying special dividends, or restructuring the balance sheet.

Definitive Merger Agreement The binding legal contract that governs an acquisition, including price, closing conditions, representations, and remedies for breach or failure to close.

Delaware Section 203: The Three-Year Business Combination Waiting Period How Delaware Section 203 blocks mergers for three years after a 15% ownership threshold is crossed, unless exceptions are met.

Direct Listing A direct listing is a method for a private company to go public by listing its shares directly on a stock exchange, allowing shareholders to sell shares without a capital raise by the company. Direct listings are faster and cheaper than traditional initial public offerings.

Director Independence Cooling-Off Period The cooling-off period prevents former executives and affiliated parties from immediately joining the board as independent directors; typically three years.

Director Nominee Questionnaire A director nominee questionnaire is a detailed form completed by board candidates to disclose independence, conflicts of interest, other board service, and qualifications. It is required under advance-notice bylaws and SEC proxy rules.

Director Removal Without Cause How shareholders can remove a board director without cause under state law and corporate bylaws, including procedural requirements and voting thresholds.

Director Share Ownership Guidelines Minimum equity-holding requirements for board members designed to align director and shareholder interests.

Divestiture A divestiture is the sale or disposal of a subsidiary, division, or asset by a company. A divestiture can be a simple asset sale, a sale of shares in a subsidiary, or a spin-off to shareholders. Divestitures are used to raise capital, focus operations, comply with regulations, or exit underperforming businesses.

Dividend Coverage Ratio: Minimum Thresholds Explained How dividend coverage ratio measures whether earnings or cash flow supports the payout; what thresholds signal dividend safety.

Dividend Cut: Consequences and What It Signals Why dividend cuts trigger sharp stock price drops, what management communicates through reductions, and what the action reveals about a company's financial health and outlook.

Dividend Policy Framework The board-level decision model for setting dividends, choosing between residual, stable, and hybrid approaches based on cash flow, capital needs, and investor expectations.

Dividend Recapitalisation in Private Equity How sponsors use dividend recapitalisation to extract early returns by loading a portfolio company with new debt and distributing the proceeds.

Dividend Recapitalization A private-equity tactic in which a portfolio company borrows new debt to pay an early cash dividend to sponsors, extracting returns before any exit.

Dividend Reinvestment Plan Mechanics How companies structure dividend reinvestment plans, whether shares are newly issued or open-market purchased, and the dilution and float implications.

Document Destruction Policy Guidelines for retaining versus destroying business records, balancing operational efficiency with legal compliance and litigation risk.

Drag-Along Right A provision allowing majority shareholders to compel minority holders to sell their shares on the same terms in a transaction.

Dual Listing A dual listing is when a company lists its shares on multiple stock exchanges in different jurisdictions, typically to access different investor bases and raise capital in multiple markets. The same shares trade on multiple exchanges.

Dual-Class Share Structure A dual-class share structure is when a company issues multiple classes of common stock with different voting rights. Typically, Class A shares have 10 votes per share while Class B shares have 1 vote per share, allowing founders to retain voting control despite not owning a majority of economic equity.

Dual-Class Share Structures and Capital Policy In dual-class structures, founder-controlled voting power shapes a company's ability to do buybacks, issue equity, and resist activist pressure on payout policy.

Dual-Class Share Structures and Takeover Protection How dual class shares with superior voting rights create permanent founder control and insulate companies from hostile takeovers, with structural trade-offs.

Dual-Class Share Sunset Provision A dual-class share sunset provision is a contractual clause that automatically converts high-voting shares to single-class voting after a trigger event or date, balancing founder control with investor protection.

Dual-Track Engagement Running simultaneous private negotiation and public shareholder campaign to maximise settlement leverage in activist situations.

Due Diligence The systematic pre-closing investigation of a target's financials, legal standing, and operational risks—a gatekeeper in M&A transactions.

Dutch Auction Tender Offer: Mechanics and Uses Explains how a company sets a price range, collects shareholder bids, and clears at the lowest price that fills the desired repurchase volume in a dutch auction tender offer.

Earnings Quality Disclosure Extent to which reported earnings reflect true economic performance and are free from accounting manipulations or one-time items.

Earnout Contingent consideration in a merger or acquisition, tied to the target's post-closing financial performance.

Earnout Provision An earnout provision is a contingent payment to the seller of a business, triggered by the acquired company meeting specified performance targets after the acquisition.

Earnout Valuation Disputes How earnout valuation disputes arise after acquisition when revenue or EBITDA targets fall short, and how buyers and sellers resolve them.

EBITDA Add-Backs in LBO Underwriting How sponsors and lenders negotiate pro-forma EBITDA adjustments in leveraged buyouts and why aggressive add-backs inflate leverage ratios and hidden risk.

Employee Buyout An acquisition in which employees, not just executives, collectively purchase and own their company, often with leverage and external investors.