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.
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;
(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.
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:
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.