Basket Deductible

  

Categories: Accounting, Metrics, Banking

Meant to reduce transactional risk, basket deductibles are paid for losses accrued due to various types of risk.

Specifying the instances in which the seller in a transaction can be responsible for various claims, a basket deductible will limit the obligations of an indemnifying party so that they are not liable for breaches or mistakes in a transaction until a specified amount of losses are exceeded.

If a company undergoes an acquisition or merger, the basket deductible will typically be found in the purchase agreement. The presence of a basket deductible will make easier the merger or acquisition process by enumerating the various risks involved, and offering a certain level of insurance to the seller.

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Finance: What is The Difference Between ...6 Views

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Finance allah shmoop What is the difference between a horizontal

00:06

merger and a vertical merger Okay Mergers let's talk rock

00:12

As in a feller he was kind of the king

00:15

of mergers both vertical and horizontal Let's Talk about what

00:18

comprises each of these things All right in the energy

00:21

industry specifically oil Ah horizontal monopoly would exist if a

00:25

company owned all the oil wells in the world And

00:29

in fact for a short time opec owned well it

00:32

was very close to a monopoly at least an enormous

00:34

percentage of all the oil wells in the world such

00:37

that they were able to constrain supply create panic and

00:40

increase prices dramatically some five hundred percent and change the

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world during the nineteen seventies when we had a very

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weak president going against them and here's what inflation adjusted

00:51

prices for a barrel of oil looked like in that

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period So that's a horizontal monopoly like where you own

00:58

all the sources of oil coming out of the ground

01:01

horizontal So what's a vertical monopoly Well in the process

01:05

of processing oil a lot has to happen for the

01:08

system to work right first step you have to pull

01:11

All the oil out of the ground right the oil

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well but then you have to process it or synthesize

01:16

it from dinosaur coop into well something that's actually usable

01:20

in your lexus with the turbo engine Then because the

01:24

world demand is continuous you have to store the oil

01:27

and then distributed continuously forever and ever and ever and

01:31

eventually the retail customer buyer has to be ableto pull

01:34

up into a gas station think real estate here and

01:37

fill her up So if you owned a vertical monopoly

01:40

while you would own the discovery and mining of oil

01:44

the synthesis or processing of it or refining of it

01:48

as it's called in the industry you don't a storage

01:50

company a trucking and distribution company and while then a

01:54

bunch of gas stations well that would be a fully

01:56

integrated vertical monopoly So when horizontal and vertical mergers get

02:02

discussed they get framed under this format So let's say

02:05

we're coric coffee machines and we want a vertical merger

02:09

in our business because we're sick and tired of paying

02:11

coffee growers twelve cents a cup for something well that

02:15

cost them less than a penny So we at keurig

02:17

Decide to buy our own coffee plantation roasting and grinding

02:22

and processing company so that we can supply our own

02:25

coffee in our own little cups Well that would be

02:29

a vertical merger in the coffee business And it often

02:32

makes a lot of sense because all that profit that's

02:34

been given out to coffee vendors selling to the kindly

02:37

loving caffeinated folks at koi rig with then be capped

02:40

and retained by the kindly loving shareholders of keurig vertical

02:44

versus horizontal Good ways to emerge and good ways to

02:48

have a baby too But we're a g rated site 00:02:51.243 --> [endTime] so we're just just saying moving on Oh

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