International Finance and Financial Management Blog

Mergers are identified in history to be beneficial for shareholders in the merging companies, with a larger share going to the shareholders of the company being acquired. Thus, merger and acquisition activities are aimed at increasing shareholder value, which would entice investors to continue investing in the company. Acquisition of Gillette by P&G suffered some challenges during takeoff, but the deal managed to meet revenue targets within the first year, signifying positive results for shareholder. Most issues that may lead to failure of mergers and acquisitions can be avoided or dealt with to ensure long-term value for the company and the shareholders. Human integration has been a major challenge for merged companies, but examples such as the merger of P&G and Gillette among others has shown that mergers would be successful if well planned and executed. Based on the deal, P&G has payed 0.975 for each share of Gillette, appreciating the acquisition at a 20...

Markets hanging onto Yellen’s next move: It seems to be a crucial year for the markets as the Fed’s Chairman hinted at an increase in interest rates once or twice until the end of the year.  Market watchdogs are thrilled to see on how the markets will behave after the Federal Reserve rate change – should it materialise.  The USA's Central Bank last intervened in December of 2008, where interest rates dropped close to 0%.  Now that is about to change, after the vice – chairman’s speech -Stanley Fischer- announcing that irrespective of the recent market wobbles,  the plans for future the Fed moves will not change. Reasons for the change:             The Federal Reserve is in charge of the Monetary Policy which they manage, attempting to meet government mandates for maximum employment; constant – but low inflation and allowing the economy to grow at a healthy pace.  The Fed raises its benchmar...

The capital structure of a company is the way a company finances its assets. A company can finance its operations by either debt or equity or different combinations of these two sources. The capital structure of a company can have a majority of debt component or majority of equity, only one of the 2 components or an equal mix of both debt and equity. Each approach has its own set of advantages and disadvantages. There are various capital structure theories, trying to establish a relationship between the financial leverage of a company (the proportion of debt in the company’s capital structure) with its market value. One such approach is the Modigliani and Miller Approach. This approach was devised by Modigliani and Miller during 1950s. The fundamentals of Modigliani and Miller Approach resemble that of Net Operating Income Approach. Modigliani and Miller advocate capital structure irrelevancy theory. This suggests that the valuatio...

This man is known for being part of one of the biggest business fraud scandals of all time and was once known by some as the “Wolf of Wall Street”. His name is Jordan Belfort and he started the stock brokerage company Stratton Oakmont, a penny stock company he ran in the 1990’s. This company at one point employed over 1,000 brokers; well this was before the company was shut down by the Securities and Exchange Commission and Belfort was arrested by the FBI in 1998.Anyone whose seen Martin Scorsese’s  The Wolf of Wall Street  knows the scene. In the last few moments of the film, Leonardo DiCaprio, portraying Jordan Belfort – the 1990s penny stock broker, who went to prison on charges of fraud and stock market manipulation for orchestrating a massive pump and dump scheme at his New York firm Stratton Oakmont – asks a room full of salesmen at a seminar to sell him a pen. Mr. DiCaprio hands a pen to one salesman, who begins describing it: “It’s an amazing pen...” Not sat...

Margin Call focuses on a financial institution (based on an unknown company but I have my suspicions) that supposedly is the first to discover the impending doom.  This comes in the form of a fired manager Eric (Stanley Tucci) handing down his work to a clever sub-ordinate Peter (Zachary Quinto) who carries on his boss’ work that very night to discover a flaw in their risk management.   In finance, more specifically financial risk management, there is a calculation a firm can make to determine a possible maximum loss to a specific investment or portfolio on or over a specific time period.  It’s called VaR and stands for Value at Risk.  I believe Peter and Eric were using something similar and the volatility in the previous days or weeks trading were meeting the levels calculated using VaR.  Volatility mind you is just risk, the variance or standard deviation in returns.  How dissimilar are your returns from the previous ...

Warren Buffett is without a doubt one of the utmost Investor of this era, not only about because he made a super fortune but also because he is communal with his ways and thinking with people leading a part of them to success.  When it comes to Warren Buffett, you can easily be astounded by the enormous mass of the figures. Since the highest percentage of people has to deal with hundreds and thousands in their everyday life, Buffett interacts in the “universe” of six or even seven figures.  However make no mistake that this man can be categorized as the money maker with the highly rich lifestyle as is quite the opposite. He is a great mentor for investors and at the same time a good example that money does not buy you happiness as it lives in a simple lifestyle despite the huge net worth that he is carrying. What really fascinated me is the fact that Warren Buffet has donated billions of his wealth to charity over the years. If we look at what he does and has done, and are a...

China Stock Market: Is it a Market Meltdown or just a contemporary crisis? Timeline of Shanghai’s Stock Exchange: Between June 2014 and June 2015, China’s Shanghai Composite Index rose about 150 percent, reaching a peak of 5,166 on June 12.  By July 8, the bottom fell out of the market, which fell to 3,507 in less than a month. A huge decline of 32 percent, forcing Government to intervene and stabilize market pushing it back up to 4000.  However, government policies seemed inefficient to save the 5 th largest stock market, whose market capitalization is at $5.5t (on 1 st of September). The reprieve was short lived, losing more than 40 percent of its value and reaching 3097.18 by September 19. Government’s Actions:             Xi Jinping's Administration made several efforts to stop the crash, by banning listed company shareholders with big stakes to sell shares and devaluating renminbi by 1.9 percent....