Corporate finance

Empty Voting Situation where a shareholder holds voting rights decoupled from economic exposure through derivatives or lending.

Empty Voting: When Economic Interest and Voting Power Diverge How derivatives and stock lending let activists vote shares without economic exposure, creating governance conflicts and distorting shareholder democracy.

Equity Carve-Out An equity carve-out is a partial initial public offering of a subsidiary or division, where the parent company retains a majority stake and the public owns a minority stake. It is a way to create public value for a business unit while maintaining parent control.

Equity Issuance Dilution: What It Means for Existing Shareholders Equity issuance dilution explained: how new share offerings reduce existing shareholders' ownership percentage, EPS, and book value per share with worked examples.

Equity Rollover When selling shareholders keep a stake in the company alongside the PE buyer, aligning incentives in a buyout deal.

ESG Divestment Activism Campaigns by investors and NGOs pressuring companies and funds to divest from fossil fuels, weapons, and other ESG-excluded sectors.

ESOPs as an Anti-Takeover Defense How leveraged employee stock ownership plans place voting shares in friendly hands, raising the share count and making hostile takeovers harder to execute.

Exclusive Forum Bylaw How corporations use exclusive-forum bylaws to direct shareholder litigation into specific courts, and the impact on securities fraud class actions.

Exclusivity Period in M&A What an exclusivity period is in mergers and acquisitions, how long it lasts, and what sellers give up in exchange for buyer commitment.

Executive Compensation Peer Group Selection How companies pick executive pay peer groups and why peer-group inflation can ratchet compensation upward even without new board decisions.

Executive Succession Planning The process of identifying, developing, and preparing internal or external candidates to assume senior leadership roles, especially the CEO position.

Fair Price Provision Anti-takeover charter amendment requiring a bidder to pay all shareholders the highest price paid to any seller.

Fairness Opinion An independent financial advisor's assessment that a merger or acquisition price is fair to shareholders.

Fairness Opinion in M&A A fairness opinion is an independent analyst's judgment that the price in a merger or acquisition is fair to shareholders; boards use it to satisfy fiduciary duties.

Fee-Shifting Bylaw Why corporations' attempts to make losing plaintiffs pay legal costs were struck down and what safeguards replaced them.

Fiduciary Duty of Care Legal obligation for corporate directors to be adequately informed, deliberate carefully, and act reasonably before making significant company decisions.

Fiduciary Duty of Loyalty Obligation for directors to place the corporation's interests above personal gain and to disclose or avoid conflicts of interest.

Fiduciary Out Clause An exception in a merger agreement that permits a target company's board to abandon a deal if a materially superior unsolicited proposal emerges.

Flip-In Rights Plan A shareholder rights plan variant that lets all non-bidder shareholders buy discounted stock, diluting the hostile acquirer.

Flip-In vs Flip-Over Rights Plan: How Each Works Explains flip-in vs flip-over rights plans: two poison-pill mechanics that dilute either the unwanted bidder or shareholders who approve a merger.

Flip-Over Rights Plan A variation of the poison pill allowing target shareholders to purchase shares of the acquirer at a discounted price after a completed merger, diluting the acquirer's ownership.

Friendly Takeover A friendly takeover is an acquisition that is supported and approved by the target company's board of directors. The acquirer negotiates directly with the board rather than pursuing a hostile approach.

Go-Private Transaction Mechanics How a go-private transaction works: financing, SEC disclosures, squeeze-out mechanics, and shareholder approval.

Go-Shop Provision A contractual right for a target company to solicit competing bids for a limited time after signing a merger agreement.

Go-Shop Provision in Merger Agreements A go-shop provision in a merger agreement allows the target board to solicit competing bids for a limited period after signing, balancing the buyer's certainty against the seller's ability to maximize price.

Going-Private Transaction A going-private transaction is an acquisition that results in a public company being delisted and converted to private ownership. It typically involves a premium offer to shareholders and removes the company from public stock exchanges.

Golden Handcuffs Golden handcuffs are deferred compensation packages, often in the form of restricted stock or stock options, designed to retain executives by rewarding them financially for staying with the company over a long-term vesting period.

Golden Leash Agreements and Activist-Nominated Directors How activist investors pay supplemental compensation to their board nominees, raising governance conflicts-of-interest concerns among institutional investors and regulators.

Golden Parachute A golden parachute is an employment contract provision that guarantees substantial severance payments and benefits to executives if the company is taken over and they lose their positions. Golden parachutes protect executives but are controversial with shareholders.

Golden Parachute Tax Treatment Under Section 280G How Section 280G penalizes excess golden parachute payments in change-of-control deals, including the 280G threshold, excise tax rate, and how companies structure packages to stay compliant.

Golden Parachutes as a Takeover Defense Learn how golden parachutes raise the cost of acquisition by triggering executive severance upon a takeover, deterring hostile bidders.

Greenmail as a Takeover Defense Greenmail is a company repurchasing its own shares at a premium from an activist raider to end a takeover threat. Regulations and shareholder law have largely eliminated the practice.

Hostile Takeover A hostile takeover is an acquisition attempt that proceeds without the consent or approval of the target company's board. The acquirer pursues the target's shareholders directly via a tender offer or proxy fight.

Hostile Takeover Defense Mechanisms Hostile takeover defense mechanisms include poison pills, staggered boards, white knights, and Pac-Man defenses, each designed to deter or delay unwanted acquisition attempts.

Hostile Tender Offer A direct appeal to shareholders to acquire their shares, bypassing the board to gain control of a company.

How a Stock Split Affects an Existing Buyback Program Stock splits automatically adjust both the dollar authorization and share count limits of board-approved buyback programs proportionally.

How an ESOP Votes During a Hostile Takeover Bid The trustee voting mechanics and pass-through rights that determine how ESOP shares are cast when a hostile takeover offer arrives, often serving as a defense.

How Cash Conversion Cycle Affects Capital Policy Decisions A long cash conversion cycle ties up working capital and constrains buybacks and dividends. A negative cycle frees cash. See how CCC shapes capital allocation strategy.

How Companies Decide to Deploy Surplus Cash How companies deploy surplus cash: boards rank debt paydown, buybacks, dividends, capex, acquisitions using financial metrics and strategic priorities.

How Companies Set a Net Debt-to-EBITDA Target Why boards commit to net debt-to-EBITDA targets and how credit ratings, industry norms, and cycle risk drive the choice.

How Hold Period Length Affects LBO Returns How hold period affects LBO IRR and MOIC; longer holding periods allow debt paydown and multiple expansion but delay capital returns.

How Large a Stake Does an Activist Investor Typically Take? Activist investors typically acquire 5–10% stakes in target companies, a threshold that signals campaign intent while minimizing capital and regulatory burden.

How Leverage Amplifies Returns in an LBO How leverage amplifies LBO returns by magnifying equity gains through debt financing, creating disproportionately high IRR even from modest business improvement.

How Long Do Activist Investors Typically Hold Their Stakes Activist investor holding periods usually run 2–5 years from initial disclosure through campaign exit, shaped by market conditions, deal outcomes, and regulatory constraints.

How Long Does a Poison Pill Last? Rights Plan Terms Explained Poison pills typically last 1–3 years with automatic sunset provisions and governance pressure to shorten terms. Understand rights-plan duration and modern renewal practices.

How Many Years Does It Take to Win a Staggered Board? Calculate how long an acquirer must wait to gain control of a staggered board: two or three years minimum, depending on the board structure and election cycles.

How to Calculate EPS Accretion from a Stock Buyback Step-by-step guide to calculating how stock buybacks reduce share count and mechanically lift earnings per share with worked examples.

How to Calculate IRR in an LBO Step-by-step calculation of internal rate of return (IRR) in leveraged buyouts: entry equity, exit proceeds, holding period, and return drivers.

HSR Antitrust Review The US Hart-Scott-Rodino pre-merger notification and waiting-period process for large acquisitions.

Indemnification Escrow Funds held in escrow after a merger or acquisition to cover the buyer's claims for breach of seller representations and warranties.

Independent Board Chair A governance structure in which the board chair and CEO are separate people, with the chair holding no executive role, to strengthen board independence and oversight.

Influence Investor Activism Minority activists using negotiation and dialogue to drive corporate change without majority control or hostile takeover.

Initial public offering (IPO) An initial public offering (IPO) is the first sale of a company's stock to the public. IPOs involve bookbuilding, lock-ups, underwriters, and are often underpriced. Direct listings are an alternative.

Inside Director vs Outside Director Explores the distinction between inside directors, who are company officers or employees, and outside directors, who bring independent judgment and oversight to corporate governance.

Integrated Governance Reporting A disclosure framework that combines financial results, governance practices, ESG performance, and strategy into a single comprehensive report.

Interest Tax Shield in Leveraged Buyouts How the tax deductibility of debt interest creates incremental value for LBO sponsors and how tax reform has eroded this benefit.

Interlocking Directorates as an Informal Takeover Barrier Overlapping board memberships between a company and its friendly shareholders create informal resistance to hostile bids. Learn how interlocking directorates work and their antitrust limits.

Internal Control Assessment Management's evaluation and attestation of the effectiveness of internal controls over financial reporting, required by Sarbanes-Oxley.

Junk Bond Financing Raising acquisition or operational capital through high-yield, below-investment-grade debt offerings with elevated default risk.

Just Say No Defense A takeover defense where the board indefinitely refuses to negotiate or redeem a poison pill, betting that director tenure and shareholder patience will outlast the bidder's resolve.