Aspectos de la influencia de la traducción en la lengua árabe

GLOSSARY

Asset Spinoff The defending party identifies the assets most desirable to the raider. It then spins off the assets to one of its separate companies or sells them to a third party. Recent examples are Union Carbide and Marathon Oil.

Capitalization The conversion of income into value. The capital structure of a business. The determination of an asset value based on expenditures.

Capitalization factor The inverse of a capitalization rate. For example, a capitalization rate of 25% is a capitalization factor of 4.0 (1.0/25%). Capitalization factors and capitalization rates are used interchangeably by appraisers.

Capitalization of earnings valuation method A valuation methodology that presumes the value of a business is generally determined by dividing its earnings by the investment rate of return the business should yield for investors.

Capitalization rate A divisor used to convert an income amount into a value equivalent. The rate used in the denominator of the capitalization of earnings method. Generally determined to be the rate of return expected for an investment, reduced by the growth expected for the investment. A key component of many valuations is the determination of this rate.

Capital structure Usually, the percentage of the company’s invested capital made up of interest bearing debt and equity. Possibly, the composition of the liabilities and equity side of the balance sheet. Possibly, values restated to fair market values.

Cash flow Cash income created by a company. Often defined as net cash flow or gross cash flow.

CDOs See corporate development officers (CDOs).

Conglomerate merger This occurs when two companies in unrelated industries combine, such as where an electronics company joins with an insurance company.

Consolidation With a consolidation, two or more companies combine to create a new company. None of the consolidation firms legally survive. For example, companies A and B give all their assets, liabilities, and stock to the new company, C, in return for C’s stock, bonds, or cash. Corporate development officers (CDOs) The heads of in-house merger and acquisition teams. Discounted earnings valuation method A valuation methodology that presumes the value of a business or ownership holding is equivalent to the expected earnings anticipated for the company in future years. A conceptually sound methodology often dismissed as being too speculative to be valuable for fair market value appraisals.

Discount rate A rate of return used to convert a value in the future into a present value. The rate of return used to discount future values to present values in the discounted earnings valuation method.

Discretionary cash flow Cash flows of a business generally available for distributions to owners and for reinvestment.

Divestiture involves the partial or complete conversion, disposition and reallocation of people, money, inventories, plants, equipment and products.

Due diligence An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale. Generally, due diligence refers to the care a

reasonable person should take before entering in an agreement or transaction with another party.

Excess earnings valuation method A valuation method that presumes a company should be able to earn a predictable level of income based on its tangible assets. To the extent the company earns more than the predictable level of income, capitalized, the company is deemed to have intangible assets. Also referred to as the "formula" method, the IRS method, and the Treasury method.

Fair market value The price at which property would change hands between a willing buyer and a willing seller, in an arm’s length transaction, when both parties have relevant knowledge of the facts, and neither is compelled to buy or sell. The definition of value for tax valuations and many others.

Golden parachute Management compensation arrangements that are triggered when there is a purchase of the business such as lump-sum benefits, employment agreements, and stock options. Recent examples are Greyhound and Hughes Tool.

Greenmail The target company buys back the stock accumulated by the raider, at a premium. Recent examples are Texaco, Walt Disney, and Goodyear.

Herfindahl-Hirshman Index (HHI) The sum of the squared market shares multiplied by 10,000 to eliminate the need for decimals. By squaring the market shares before adding them up, the index weights firms with high market shares more heavily. The value of the

Herfindahl-Hirshman Index lies between 0 and 10,000. A value of 10,000 exists when a monopolist exists in the industry. A value of zero results when there are numerous

infinitesimally small firms. The HHI is used by the Department of Justice to evaluate horizontal merges.

Holding company One whose sole purpose is to own the stock of other companies. In a tender offer, the buyer goes directly to the stockholders of the target business to tender (sell) their shares, typically for cash.

Horizontal merger This occurs when two companies in a similar business combine. An example is the combining of two airlines.

Leveraged buyouts (LBO) refers to a very popular form of taxable transaction in which the purchase price is funded primarily by lenders rather than by the buyer.

Liquidation value The value of a business not as a going concern. Often, the accumulated value of a company’s assets (less liabilities) presuming the assets are sold separately.

Merger In a merger, two or more companies are combined into one, where only the acquiring company retains its identity. Generally, the larger of the two companies is the acquirer.

PAC-MAN The defending company makes a counteroffer for the stock of the raiding company. Recent examples are American Brands and Bendix Corporation.

Poison pill When a hostile bid is eminent, the targeted company takes out significant debt (or issues preferred stock) that makes the company unattractive to the hostile acquirer because of the high debt position.

Price/earnings valuation method The valuation of a company or ownership interest in which a ratio determined by publicly traded stocks or sales of closely held businesses is used to value the subject business. For example, if the price/earnings ratio is determined to be 6.2, and the subject company’s earnings are $100,000, the value of the company is estimated to be $620,000

($100,000 times 6.2).

Purchase method involves either the payment of assets or incurrence of liabilities for the other business. To effect a purchase, more than 50% of voting common stock has to be acquired. Recapitalization is a nontaxable exchange that is typically used to pass control of a corporation to new owners, frequently the younger generation.

Self-Tender After a hostile bid, the target company itself makes a counteroffer for its own shares. A recent example is Newmont Mining.

Valuation The act or process of assigning a value to something. Generally synonymous with "appraisal."

Vertical merger This occurs when a company combines with a supplier or customer. An example is when a wholesaler combines with retailers.

White Knight The defending company finds a third party who is willing to pay a higher premium, typically with “friendlier” intentions than the raider. Recent examples are Gulf Oil Corp. (Chevron) an Sterling Drugs (Eastman Kodak).