Posted in Finance, Accounting and Economics Terms, Total Reads: 437
Definition: Upstairs Deal
A business deal or an agreement known only to senior level managers of a company and not known to the employees at the lower levels in a hierarchy. In the case when a firm is acquiring another firm in a friendly manner rather than a hostile manner, the ongoing deal is kept hidden in order to maintain stability and keep its impact low on the company share prices.
If the proceedings of the deal do not go as smooth as expected, it is in the best interest of a company to keep it under wraps (to prevent fluctuation generated by it) till the time it results in successful acquisition. After successful implementation of the deal, it is certain that the impact will be positive. So, the risk of the failure is reduced by upstairs deal.
Example: If company A is in talks with company B for acquisition and share price of A is $60, the deal is kept upstairs so the share price doesn’t fall below $60 during the course of the deals and potentially reach $70-75 after successful completion of deal.