BZT

Back to basics

Means that a company concentrates on its principal business, or on those business areas in which it is particularly competitive.

Most companies, when times are good, have a tendency to expand their activities into new business areas and markets. Costs and investments increase.

When times are bad, the Board of Directors and the management have to cut back on activities and reduce costs. "Back to basics" may then mean that the company will close down, or sell, those parts of the business which are not part of its core activities.

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Bail

Bail means to provide a guarantee for somebody else’s debt, i.e. to guarantee to pay in case the person to whom one provides a guarantee cannot or doesn’t want to pay his debt.

The term is traditionally used when someone deposits the money to the court or repledges other assets so that the court can release the suspect from prison. The pledge guarantees that the suspect will arrive to the court for the trial – if not the one who provided the guarantee is going to lose the pledged asset.

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Baisse

Downturn on a securities exchange, fall in stock prices. From the French word "baisse" which means reduction. The opposite of "baisse" is "hausse". See also "Bear market".

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Bear market

Downturn on a securities exchange, fall in stock prices and pessimism as to future developments in stock prices. The opposite of "bear market" is "bull market". It is said that the bull holds its head and horns pointing upwards while the bear goes about with its head bowed down.

See also "downturn".

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Beauty contest

When competing providers, for example in connection with the purchase of consulting services, are given an opportunity to introduce themselves to the purchaser and to describe what they can offer and why they rather than others should be chosen.

Usually the client has given the providers a specification as to what is to be covered and instructions as to how the presentation is to be made.

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Beauty parade

When competing providers, for example in connection with the purchase of consulting services, are given an opportunity to introduce themselves to the purchaser and to describe what they can offer and why they rather than others should be chosen. Synonym of "beauty contest".

Usually the client has given the providers a specification as to what is to be covered and instructions as to how the presentation is to be made.

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BIMBO

This is an abbreviation of the expression "Buy In Management Buy Out” which describes a situation where an external company management, together with the company's present management, buy out a company (or a business) from its present owner. A BIMBO can be a situation which requires financing and which is an attractive investment for a venture capitalist and Private Equity.

BINGO

Abbreviation of "Buy In Growth Opportunity" which is used when an external company management buys into a company with great growth potential. BINGO can be a situation which requires financing and is an attractive investment for a venture capitalist and Private Equity.

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Black knight

An undesirable investor in, or buyer of, a company who intends to change the company's direction and is prepared to make all the changes necessary to accomplish that, both in the board of directors and in the management.

The owners, the Board of Directors, and the management will do all they can to defend themselves against the "black knight" and to avoid its obtaining control of the company.

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Blue-chip

Blue-chip is a term used for financially stable companies with a good reputation, and that are well established in their industry. A blue-chip company is expected to be non-cyclical and should deliver attractive profits in good as well as in bad times. Typically, the company is among the top three in its industry with a well-respected brand. The term, as such, comes from poker.

It is complex to define what is a blue-chip company. The Dow Jones index may be a guidance since it is supposed to include US blue-chip companies, such as Apple, Coca-Cola, Intel, and Microsoft.

Shares in blue-chip companies are considered to have a lower risk compared to non-blue-chip. They should have solid profitability and regularly pay dividends to their shareholders. Common investors in blue-chip shares are institutional investors managing public money, such as pension funds.

The opposite to blue-chip is the so-called penny stocks, which typically have lower and less stable share price. Penny stock companies will regularly not pay dividends to their shareholders.

Shares in blue-chip companies are, of course, not unaffected by major, adverse events impacting the stock market - for example, during a stock market crash.

Of course, a blue-chip company can suffer from challenges other then a general stock market decline, make losses, and in the worst case, go bankrupt. There are several well-known examples where reputable businesses have experienced severe problems during disruptive market changes. An example is digitalization and its impact on businesses such as Kodak and Agfa. The change in technology opened up for devastating competition from brand new companies.

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Board of Directors

"The Board of Directors" is the company's ruling body (sometimes abbreviated BoD). The Board of Directors is the company's highest decision-making body for strategic and tactical issues, if we exclude the meetings of shareholders. It is charged with the duty of managing and developing the company in the best possible way so as to create value, in the first instance for the owners but also for other interests.

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Bona fide

A "bona fide transaction" is a transaction with honest, reliable parties, acting in good faith, and on terms and conditions customary in the market. Compare with "Arm's length" distance.

Book building

A process for creating a demand and a price picture, for example during an issuance of shares or a listing on a securities exchange. Ordinarily an investment bank functions as coordinator (broker) in the process. Book building is also used in connection with the issuance of other securities. The broker builds a book with investors who are interested in the transaction.

It is an offering process in which the investors state how many shares they are interested in, and at what price. The auction proceeds confidentially, and outside of a securities exchange if a listed company is involved.

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Boot Camp

Boot Camp (bootcamp) is a term used in some business situations to describe various types of gatherings involving education and in combination with some kind of physical exercise. It may, for example, refer to an event where participants get an intensive course on how to use social media for their marketing while exercising with physical exercise, and healthy food.

Boot Camp originates from the US military, where it is a term for an intensive physical training camp for young recruits in the army. The name is also used as a term for rehabilitation programs for young criminals instead of imprisonment.

A completely different meaning of Boot Camp is as the brand of the Apple software to enable the use of Windows operating systems on Apple computers (in addition to MAC OS).

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Branding

It is difficult to give a precise definition of "branding" since it can embrace a great number of widely disparate activities. In brief one can say that it is a long, persistent process to build an honest and positive picture (image) of the company in the customer's consciousness. A good brand must evoke positive feelings and promise the customer satisfaction and quality. Examples of well-known brands are Coca Cola, Apple, IKEA and BMW. See also "Intangible Assets".

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It is not only businesses which build and maintain strong brands. Examples of this are the Red Cross, the UN and Save the Children. Even political parties build the brands under which they market their ideologies, for example Liberals and Conservatives.

Sometimes brand is said to be the same as trademark, which is a somewhat limited definition. A trademark is a sign (symbol, word, letter combination etc.) that you recognize and associate with the company. The trademark must, however, be in harmony with the image the branding is creating.

What, then, is the business point of branding? The goal of a strong brand is to be able to have higher prices than one's competitors, and thus also higher margins and profits. And higher profits are needed since significant investments are necessary to build, develop and maintain a strong brand.

A strong brand is a valuable element in the company's balance sheet -- an intangible asset. In turn, this can provide substantial goodwill assets, which are sometimes difficult to define the value of, in connection with acquisitions of companies.

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Break-even point, BEP

The point where "plus" and "minus" are equal. An example is when revenues and costs balance, that is that the revenues are the same as the costs during the measuring period.

Break-even can also be the point where profits and losses balance or the company reaches a positive cash flow so that what is received in payment is equal to what is paid out. This may mean that the business begins to make a profit above break-even. This point is sometimes called "ground zero".

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Bridge financing

Financing for the purpose of bridging a gap in the company's finances for a relatively short period of time, for example in connection with an acquisition or in the event of temporarily strained liquidity. It is also possible to use a bridge in order to finance a growth company which is planning a securities exchange listing and a new issuance of securities.

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Bubble

A financial bubble is a rapid increase in the price of an asset, which, after a certain period, turns into a rapid price drop (the bubble bursts). Bubbles often occur in a particular industry and may include a rapid increase in the share price of certain companies, the price of real estate, or the price of a particular commodity.

A bubble is a speculative, upward spiral caused by good access to capital and exaggerated expectations of future value growth. More and more investors pay an increasingly high price, which quickly exceeds the real value of the asset. At the start of the bubble, investors may make huge profits by selling the asset in an upward spiral, which, in turn, attracts new investors and financiers.

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However, sooner or later, the financial bubble will burst. When and how the turnaround will come is impossible to predict. The shift is triggered by some unforeseen event--big or small--that creates uncertainty about the real value of the asset. When the financial bubble bursts, the price of the asset will decrease in a rapid downward spiral. The financiers are no longer willing to provide capital for investments and, instead, demand repayments. Investors now sell their assets in a panic, trying to cut their losses and repay any debts. As the price falls, there are more and more sellers and less buyers, which in turn increases the downward spiral. If an investor has borrowed against the investment and assets were used as collateral, the lender may force a sale -– even at a loss. But at a certain price level and time, the decline of the price stops. New investors begin to believe that the asset is undervalued. This is the time to buy; the price slowly increases and is normalized

The winners in the bubble are those who bought early at a low price and sold at a high price, just before the bubble burst. The losers are those investors who came in late. They paid a high price and did not have time to sell, or did not want to sell, before the downturn began. Late investors usually wait too long to sell; they hope the price will turn so they can avoid or reduce their loss.

How can you recognize a bubble? It's probably impossible to understand if a rapid price increase in an asset is based on an underlying real value growth or if it's a speculative bubble. You should be careful and observant if the price of an asset rises suddenly and quickly without an apparent change in the asset's real return.

What then are the consequences of a financial bubble? If the bubble involves only a particular asset, such as shares in a small company, the economy in general is largely unaffected. But if the bubble covers the entire stock market or significant and large companies, the burst can lead to a stock market crash and a recession for an entire country. The financial bubble will then impact the real economy, and the effects are extensive.

There have been a number of famous bubbles throughout history. One very well-known bubble was the tulip bubble in Holland (1630). Speculation in tulip bulbs drove values to extremes. During the bubble of the South Sea Company in England (1720), there was speculation in the stock of the South Sea Company, which was trading in the South Sea and other parts of America. The stock exchange crash in the US (October 1929), also known as Black Tuesday, was the most disastrous stock market crash in the history of the United States so far. It led to the Great Depression, which spread to all Western industrialized countries. Black Monday refers to Monday, October 19, 1987, when stock markets around the world crashed after a huge share price increase in a very short time. The IT crash (March 2000), or the dot.com bubble had to do with speculation in assets related to IT and the Internet. The financial crisis of 2008 (September 2008) refers to speculation in various assets, e.g., the housing market, real estate, and subprime mortgages. It led to the loss of confidence in banks, finical institutions, and to the bankruptcy of the Lehman Brothers.

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Bull market

Upturn on a securities exchange, increased market prices and an optimistic belief about the future development of market prices. "Bull market" is the opposite of "bear market". It is said that the bull holds its head and horns pointing upwards while the bear goes about with hits head bowed down.

See also "Hausse".

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Burn rate

Is a measure which describes the capital (cash) which is being used (burned) in a company which does not have its own positive cash flow.

Burn rate shows the company's current costs and necessary investments and is often measured in €/month. If the company has cash of €10m and its "Burn rate" is €2m/months the cash will last for 5 months. Unless break-even is reached during this period, the owners or the bank will have to provide more capital within 5 months, or else the company will not survive.

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Business angels

Business angels, also called angel investors, are private individuals who invest their own money in enterprises -- often newly-started ones (start-ups). The name comes from these investors being regarded more as charitable donors than as rational capitalists.

A typical business angel is a successful entrepreneur who has previously built up a business, sold it and now shares his capital, his experience and his network with a young management team which has started its first business.

The motive behind the investment is thought to be principally the interest and pleasure derived from helping newly-started companies to succeed. But there is obviously also a financial motive.

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Business as usual

"Business as Usual" (BAU) means that the business –-or organization-- is conducted in a normal, usual way. The term is used in conjunction with a business that is subjected to extensive external events that may affect the business positively or negatively. However, we do not know yet when and how. The business is run in a normal manner until we know with certainty that the business is affected and how it is affected.

BAU is sometimes confused with the status quo, which is misleading. The status quo means that no changes are made at all while BAU includes normal, planned changes.

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Business Plan

A business plan is a description of a company's business that is both wide-ranging and detailed. The plan will contain a description of the company's business concept, strategies for various business areas, activity plans, resource needs, and financial plans. You may start with a marketing plan which is then included as part of the business plan.

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Bust, going bust

An expression for a company going into bankruptcy. Sometimes the term "Belly up" is used.

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Buy and build

Investing in one (1) company with the intention of building a larger company by the acquisition of companies which complement the business or increase market share. "Buy and Build" is an investment strategy which Private Equity investors, for example, avail themselves of.

An example is an investment which is made in a company in UK and which later buys up competitors in Germany, France, Spain and Italy. By means of the acquisitions, the market is consolidated and a larger European company is created. A company with a broader geographic platform is generally seen as having higher value for a purchaser than a company which is only active in one domestic market.

Buy-out transaction

When an external buyer, for example a Private Equity investor, buys out a business (e.g. a subsidiary) from a company or an ownership group. In a so-called "leveraged buy-out" the financing of the acquisition has great significance.