In the 1980s, hostile takeovers and LBO acquisitions were all the rage. Companies sought to acquire others through aggressive stock purchases and cared little about the target company’s concerns. The 1990s were the decade of friendly mergers, dominated by a few sectors of the economy.

Mergers in the telecommunications, financial services, and technology industries were commanding headlines, as these sectors went through dramatic change, both regulatory and financial.

M&A transactions can be roughly divided into either mergers or acquisitions. These terms are often used interchangeably in the press, and the actual legal difference between the two involves arcana of accounting procedures, but we can still draw a rough difference between the two.

Acquisition – When a larger company takes over another (smaller firm) and clearly becomes the new owner, the purchase is typically called an acquisition on Wall Street. Typically, the target company ceases to exist post-transaction (from a legal corporation point of view) and the acquiring corporation swallows the business.

Merger – A merger occurs when two companies, often roughly of the same size, combine to create a new company. Such a situation is often called a “merger of equals.” Both companies’ stocks are tendered (or given up), and new company stock is issued in its place. For example, both Chrysler and Daimler-Benz ceased to exist when their firms merged, and a new combined company, DaimlerChrysler was created.

On the mergers and acquisitions (M&A) advising side of corporate finance, financial advisors assist in negotiating and structuring a merger between two companies. If, for example, a company wants to buy another firm, then a M&A advisory firm or investment bank will help finalize the purchase price, structure the deal, and generally ensure a smooth transaction.

If you’ve ever been to a trading floor, you’ve witnessed the chaos. It’s usually a lot of swearing, yelling and flashing computer screens: a pressure cooker of stress. Sometimes the floor is a quiet rumble of activity, but when the market takes a nosedive, panic ensues and the volume kicks up a notch. Traders must rely on their market instincts, and salespeople yell for bids when the market tumbles. Deciding what to buy or sell, and at what price to buy and sell, is difficult when millions of dollars at stake!

Trading can be done for clients, for the company itself (proprietary trading). An important part of proprietary trading is market making. A market maker aims to make money by buying stock at a lower price than the price at which they sell it, or selling the stock at a higher price than they buy it back. Ordinarily they can make money in both rising or falling markets, by taking advantage of the difference between "bid" and "offer" prices.

Asset management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate) in order to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via mutual funds or exchange-traded funds).

Asset managers and portfolio managers are expected to understand portfolio theory. Regardless of the type of portfolio he or she manages, the aim of every portfolio manager is the same: to achieve the highest rate of return possible given the asset class he or she is investing in while minimizing risk. As a portfolio manager, the type of risk you are allowed to assume depends on the type of assets or fund you are managing, but your job is still to keep the risk as low as you can while still achieving the expected returns.

Asset management is a very rewarding and exciting industry. Financial markets are very unpredictable, as seen in the last several years! Managing a multi billion dollar portfolio is not a job for the idle minded!