Glossary

Hands off

A merely passive support of an investor's investment is called a hands off. Here, the investor does not intervene directly until an exit, but allows the managers of the company to act freely.

Hands on

Hands on support can be described as active support and means that an investor actively supports the management and is interested in a rapid increase in value (participation in advisory boards, supervisory boards and activities beyond that).

Hard underwriting

Hard underwriting refers to the guarantee of an issuing bank to the issuer that the shares offered will actually be sold on the market at the price offered. If there is insufficient demand, the banks themselves must purchase the remaining stock at the offer price. In practice, hard underwriting, also known as commitment underwriting or firm underwriting, is rare. More common is the issue by way of bookbuilding.

Heads of Agreement

In a Heads of Agreement, the key points of an intended contract are fixed by the contracting parties. The term "term sheet" is used almost identically. The binding nature of the key points depends on the structure of the agreement.

Hedge counterparty

The party that assumes the risk to be hedged under a hedging agreement (see also Hedging Agreement) is called the hedge counterparty.

Hedge fund

A hedge fund is a fund that invests its funds largely in derivatives on the futures market or exploits price differences of financial instruments through other innovative products, which can generate high returns in a short period of time. Hedge funds are subject to no or at least only minor regulatory obligations.

Hedging

Hedging is the name given to a hedging transaction that serves to limit certain risks. Almost all types of risks can be hedged on the capital market. The majority of hedges relate to interest or exchange rates.

Hedging agreement

The Hedging Agreement is a contract in which the parties agree on a hedging transaction. The standard ISDA models are used for this purpose.

Herfindahl-Hirschman Index

The Herfindahl-Hirschman Index is used as an indicator for antitrust prohibitions, as it provides a statistical measure of market concentration. It is used, for example, to measure the effects of concentration, e.g. in the case of company mergers. 

Hive-down

In a hive-down, a part of a company is transferred to a subsidiary or sub-subsidiary by means of a spin-off, spin-off or individual transfer of assets.

Hockey Stick

The hockey stick is the term used to describe a steep and sustainable development of the company's financial ratios in a turnaround situation. The Hockey Stick bears this name because the graph in such a situation resembles the shape of a hockey stick.

Hold-back

The term hold-back refers to the withholding of services owed. In the context of M&A transactions, hold-back describes the partial withholding of the purchase price by the buyer, who thereby secures possible warranty claims against the seller. Thus, a hold-back has the same function as an escrow (see also Escrow), with the difference that no bank or escrow agent has to be involved.

HoldCo

HoldCo is the abbreviation of holding company (see also Holding Company) and is another term for the parent company of a group of companies.

Hold Harmless Clause

A hold harmless clause is a contractual provision that obliges one party to indemnify another party against certain risks, e.g. claims for damages.

Holding company

A holding company (abbreviated as Holding or HoldCo) is a parent company of a group of companies. As a rule, the holding company does not itself carry out operational activities, but merely holds interests in operationally active companies.

Hostile takeover

In the case of a hostile takeover, a public takeover bid is made to the shareholders against the will of the management of a listed company (target company).

Hurdle Rate

A hurdle rate is the calculatory basic interest rate of the investors (limited partners), for example of a venture capital fund. Only when the hurdle rate has been exceeded does the management of the fund receive a profit share (carried interest).

Hurt Money

Hurt money is a special form of contractual penalty for company acquisitions. It is agreed in the event that one of the parties is at fault and the company purchase contract is not concluded or executed.