Chp 11: Context of Business Valuations

Question 1

What are the three concerns of Big Data?

Answer 1

1. Privacy - whilst being beneficial to the company, it could be harmful in the wrong hands
2. Security - companies using Big Data should ensure they don’t infringe on individuals security
3. Intellectual Property - could include ownership of material on social media and who can use them

Question 2

What is the synergistic effect and what are the three main types of synergy?

Answer 2

The additional beenfits when two or more companies join together

ie. 2+2=5

Types
1. Revenue - higher revenues from eg. sharing customer information
2. Cost - economies of scale
3. Financial - Diversification, surplus cash, tax benefits, debt capacity

Question 3

What are the three types of acquisition?

Answer 3

1. Horizontal - companies in similar lines of work
2. Vertical - companies up (backward) or down (forward) the supply chain
3. Conglomerate - acquisition in a different line of business

Question 4

Whatis tax inversion?

Answer 4

Acquiring a company in a lower tax area and then reincorporating into that area

Question 5

What is mezzanine finance?

Answer 5

Finance that has characterisitics of both debt and equity

Eg. Convertible preference shares