Banking Terms - Set 24 (Upstairs, Sweetheart & Package Deal, Apple Pay)

Sweetheart Deal

A merger, a sale or an agreement in which one party in the deal presents the other party with very attractive terms and conditions. The terms of a sweetheart deal are usually so lucrative that it is difficult to justify turning the offer down.

This term can be used to describe a variety of deals, but in general, a sweetheart deal is a transaction that simply can't be passed up. For example, a merger may be a sweetheart deal for the top executives of the target firm because they get very healthy buyout packages. This kind of sweetheart deal is usually considered unethical, however, because it may not be in the best interests of shareholders.

Package Deal

An order that contains a number of exchange or deposit items that must be completed simultaneously, or not at all. Package deals allow traders to ensure specific prices or times to maturity for multiple assets.

A trader may want to participate in a package deal to properly execute an investment strategy. For example, let’s say an investor wants to enter into a long-short strategy, where he or she purchases one stock and short sells another. Making this order a package deal will protect the investor in case either stock is not immediately available for purchase or sale. The investor may not want the exposure of being only long or short for the period of time required to complete the second transaction.

Apple Pay

Apple Pay is a mobile payment service that lets certain Apple mobile devices make payments at retail and online checkout.  It intends to digitize and replace the credit or debit magnetic stripe card transaction at credit card terminals. The service lets Apple devices wirelessly communicate with point of sale systems using a near field communication (NFC) antenna, a "dedicated chip that stores encrypted payment information" (known as the Secure Element), and Apple's Touch ID and Passbook.

Upstairs Deal

A business agreement that is made by upper management, and is generally unknown to lower-level employees until it is publicly announced. The deal is referred to as an "upstairs deal" because executives typically have their offices in the higher floors of an office building. In mergers and acquisitions, an upstairs deal between two companies is more likely to result in a friendly takeover, as opposed to a hostile takeover.

E.g. Keeping word of a potential merger quiet allows executives to operate with a reduced risk of outside parties profiting from the deal by driving up share prices. Once a takeover offer is announced, share prices will react by either moving up or down to the indicated target price. For example, a deal in which a company tenders an offer of $15 per share with shares currently trading at $10 per share will likely result, when announced, in shares adjusting to $15.