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ARCHIVE | Criteria | Corporates | General: Acquisition Risk And Its Effect On Ratings
Standard & Poors, Sep 2006
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
Abstract
Virtually any company can become a takeover target. Because Standard & Poor's Ratings Services recognizes that the potential for an outside entity launching a takeover bid is so broad and cannot be predicted, our ratings do not focus on this risk; the potential for the acquisition of a rated company therefore is, treated as a random event. By contrast, the propensity for certain companies to take on risk and transform the existing financial profile can be very predictable. In such situations, the credit rating should always have reflected that risk. Sponsor-owned companies fall into this group: please see 'Credit FAQ: Knowing the Investors in a Company's Debt and Equity Securities,' published April 4, 2006, on RatingsDirect, the real-time Web-based source...
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