Barbarians at the Gate: The Fall of RJR Nabisco

A “buyback” refers to companies purchasing their own public shares.

Due diligence is a process of systematically analyzing a company to minimize risks of performing financial operations with it, such as making investment decisions.

“Insider trading” refers to the purchase or sale of a public company’s shares based on material information unavailable to the public that could significantly impact such decisions. The Insider Trading Act of 1988 increased penalties for this type of activity.

Investment banking is a form of banking that aids companies and organizations in carrying out financial transactions or raising funds for such transactions. Investment banking typically focuses on mergers and acquisitions or helps companies go public through an IPO (initial public offering).

Ivan Boesky, a Wall Street stock trader, was amidst an insider trading scandal in the 1980s. In 1986, he pled guilty to violating federal securities laws.

A junk bond is a high-yield bond that is associated with a high level of risk because it is based on debt with a low credit rating and a greater chance that its issuer may default.

A leveraged buyout (LBO) is the purchase of a company by using large amounts of debt. In many cases, the buyer then divests certain assets to pay down the debt in addition to using the company’s cash flow.

Merchant banking provides services in the realm of mergers and acquisitions, underwriting, asset management, and investment banking.

Mergers and Acquisitions (M&A) is a banking field in which companies undergo consolidation or takeovers by other companies.

PIK, Payment in Kind, relies on goods or services rather than money as a form of payment.

A raider is an investor who targets undervalued companies to profit from them quickly by buying shares and then influencing how a company is managed.

Securities are financial assets that can be bought, sold, or traded. They can take on the form of debt securities, like bonds, or equity securities, like stocks.

Tender offers are bids to buy company stock that usually occur publicly and encourage shareholders to sell their shares within a specified period.

Underwriting is a process through which a bank or another type of financial institution accepts a financial risk in exchange for client fees. Underwriting covers securities, loans, and insurance.