onomi     on epts and erminolo ies        22.49
          India’s average tariffs are much higher than      golDen PArAchute
     those existing in the developed countries. If a linear
                                                            A generous severance term written into the
     formula for tariff reduction was used, then its        employment contracts of the directors (of a firm)
     reduction burden would have been proportional          which makes it expensive to sack them if the firm
     to that of developed countries. However, using         is taken over.
     a Swiss formula could lead India to taking on a
     greater reduction commitment than its developed        green mAil
     counterparts with lower initial tariffs.               A situation of takeover bid when the bought-
                                                            up shares by a potential bidder is actually being
        systemic risk                                       bought by the directors of the firm itself.
     The risk of damage to the health of the whole          leverAgeD biD
     financial system. In modern financial world, the       A takeover bid being financed primarily by the
     collapse of one bank could bring down the whole        loan.
     financial system.
                                                            PAc-mAn Defence
        tAkeover                                            A situation when the firm being bidded for
                                                            takeover, bids for the bidder firm itself–also
     The process of one firm acquiring the other, also      known as reverse takeover bid.
     known as acquisition. As opposed to the merger
     which is an outcome of ‘mutual agreement’,             Poison Pill
     takeovers are ‘hostile’ moves.                         A tactic used by the firm being bidded of merging
          Takeovers may be classified into three broad      with some other firm in order to make itself
     categories:                                            less attractive (financially or structurally) to the
          (i) Horizontal takeovers involve firms which      potential bidder.
              are direct competitors in the same market;
                                                            PorcuPine
         (ii) Vertical takeovers involve the firms having
                                                            Any agreements between the firm being bidded
              supplier-customer relationship; and
                                                            and its suppliers, creditors, etc., which are so
        (iii) Conglomerate takeovers involve the firms      complex that after the takeover the bidder firm
              operating in unrelated markets but intend     feels diffculties integrating it.
              diversification.
                                                            shArk rePellAnts
        tAkeover biD                                        The measures specially designed to discourage
                                                            takeover bidders (e.g., altering the firm’s articles
     An attempt of acquiring the majority share in a        of association to increase the proportion of
     firm by another firm. There are various terms to       shareholder votes needed to approve the bid above
     show the ‘tactics’ applied in such bids either by the  the usual 50 per cent level, etc.).
     bidder or the bidded firms:
                                                            White knight
     blAck knight                                           The intervention of a third firm in a takeover bid
     The launch of an unwelcome takeover bid (as the        which either merges with or takes over the victim
     Mittal’s for the Arcelor in recent past).              firm to rescue it from the unwelcome bidder.