Guide to Analysing Companies

Mergers and acquisitions
Shorthand for mergers between companies and acquisitions of
one company by another; also the name given to the department
of an investment bank that advises on such things. The level
of mergers and acquisitions (m&a) depends to a large extent on
the buoyancy or otherwise of stockmarkets, since most ac-
quisitions by listed companies are paid for with the shares (or
other securities) of the acquiring company. Thus the higher
the value of the shares, the greater is a company’s buying power.
The boom in m&a during the 1990s, particularly among tech-
nology and telecoms companies, was therefore stoked by the in-
vestment boom that accompanied it, and vice versa.
m&a activity is more prevalent in Anglo-Saxon countries
where there are developed capital markets than in, say,
parts of continental Europe. Japan is the exception; it has a de-
veloped capital market yet the level of m&a has traditionally
been low. Fortunately for investment banks, the equity and
debt markets are rarely down and out at the same time.
M
202
MERCHANT BANK
02 Essential Finance 10/11/06 2:22 PM Page 202

---

Mezzanine
A layer of finance that falls between equity and senior debt
in terms of its priority in a payout or liquidation. Mezzanine
finance is often used as part of a management buy-out
where a company has difficulty borrowing money from a
bank, perhaps because it lacks tangible assets against which
the bank can have security or because its business is new.
Mezzanine capital is usually made up in part or all of subor-
dinated debt, convertible loan stock or preference
shares, all of which rank above straightforward equity if the
company is ever broken up or liquidated.
Middle price
A price halfway between the buy price (which is higher) and
sell price (which is lower) quoted for a security. When a
newspaper or website quotes one price for a share, it is
usually the middle price (or mid price).
Mixed credit
Usually known by its French name, 
crédit mixte, this is a
mixture of trade finance and development aid made available
by governments and international agencies to pay for the
export of goods or services to developing countries. The general
agreement known as the consensus lays down that the aid
portion of mixed credits must not be less than 20% of the total.
Monetary policy
A government’s plans of how to regulate the money supply in
order to further economic policy on growth, employment, in-
flation and so on. In many developed countries (including
the United States, the UK and the countries within the euro
zone), monetary policy is left to the central bank. This has