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Secret Ways of Buying Stocks (Part 2)

2 October 2007 - Features - Editor

Secret Ways of Buying Stocks (Part 1)

Inequalities and Oddities in Battles for Stocks

Relationships with ambitious and powerful bankers have to be built up over time. It is not as though anyone can walk in to one of their plush offices and expect a pile of cash to buy stocks, without the right introductions and backgrounds. One also needs to develop a sense of timing, understanding cyclical moves between times of capital stringency, and others when financial institutions are hard pressed to find takers for their loans (Mintz, and Schwartz, 1985).

Interlocking directorates (Mintz, and Schwartz, 1985) are other routes which financial institutions use to exercise corporate control. Domain expertise, political connections, and demonstrated ability to participate actively in board meetings, are the qualities which bankers look for in choosing people for covenant-life loans, and plum positions.

Creativity and an eye for detail are sterling qualities in all moves to find funds to acquire controlling stocks, regardless of the extent of leverage (Reed, and Lajoux, 1998). The trick is to borrow as much as possible against assets of a target company and against projected future cash flows as well.

Lessons for Small Guys in Matters Related to Stocks

Financial institutions take control of corporations when they are unable to meet their liabilities, or when they plan massive expansion projects, or when they need to substantially restructure their operations in order to remain competitive (Mintz, and Schwartz, 1985). Therefore, these are situations to monitor, whether you are a small entrepreneur worried about retaining control of your creation, or if your dreams of owning stocks exceed the cash in your pockets! Financial institutions believe in covert control, and work through executives, professionals, and other adventurous individuals. They are strongly focused on their commissions, and will support people who can operate as instructed, with loans at prime rates and flexible pay-back terms. It would be naïve for anyone to assert that he or she knows all about the ways of financial institutions and their behavior towards awards of loans. Each case is worth analyzing in detail, and as soon as possible after it occurs (Thornton, 2007). You can never tell when regulators or the media may wise up to events, requiring subtle changes and modifications in the tactics of acquisitions of controlling stocks!


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