Guide to Analysing Companies

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HOLDING COMPANY
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United States could also resort to a poison pill, a measure
such as a prior agreement with a third company that would
make it indigestible to a possible predator. The City of London
prides itself on its voluntary takeover code, a rule book presided
over by the panel on takeovers and mergers. The Euro-
pean Commission has tried to come up with its own code so
that companies operating across Europe can abide by similar
rules. Its efforts have met with varying degrees of success. A
hostile bid is also known as a contested bid.
Hot money
Highly mobile money that flies to wherever it can get the best
rate of return for a given level of risk. Hot money has no
long-term allegiance to any particular investment, so it flows
back and forth across exchanges and can cause wild fluctua-
tions in exchange rates. Such fluctuations have become more
and more exaggerated as exchange controls have been
removed, and as deregulation has freed money to go where
it wants.
Hot money may also refer to the fickle capital that stems
from illegal sources such as drugs and which sloshes around
offshore financial centres where there are few rules to
curb or control it.
Hurdle rate
The rate of return which a business or investment oppor-
tunity needs to satisfy in order to justify its existence. Such
returns are measured in a variety of ways – for example, on the
basis of discounted cash flow or the cost of the capital
involved compared with the expected return adjusted for the
level of risk involved. The hurdle may be the rate of inter-
est on government bonds, on the grounds that it is the least
that investors would expect to get from an alternative invest-
ment with a minimum amount of risk. Or it may be a compara-
ble rate of return adopted by firms in the same industry.