A war chest is a reserve of liquid assets, such as cash, used by companies and nations to finance military actions, political maneuvers, and hostile takeovers. It can also be used to protect against takeovers and as an emergency fund for individuals.
The term “war chest” is used to describe a large reserve of assets, especially liquidity such as cash. Since these assets are in liquid form, they are readily available when needed. War chests appear most commonly in the financial sector, where companies want to ensure they have funds ready in the event of a hostile takeover attempt. A nation may also try to build up its war chest to finance military actions and other political maneuvers.
This phrase is a reference to the large chests in which money and goods were once transported. It costs a great deal of money to wage war, and as a result many nations have historically set aside funds to handle the eventuality of conflict. It’s also not unusual for a nation to try to find ways to quietly raise money when preparing for conflict. As nations start hoarding cash, concerned observers might suggest creating a war chest with hostile intent in mind.
In the corporate world, a company preparing to attempt a takeover will assemble a war chest to make the takeover more attractive to the company it is trying to take over. By ensuring there is cash ready for the acquisition, the company may be able to negotiate a better deal than it can with stock options and less fluid forms of equity. Takeovers tend to be capital-intensive events, as companies need to acquire a majority stake in another company to effectively gain control, and this can get quite costly, especially if the attempted takeover is made public; this can cause a run on a company’s stock.
Some companies also like to keep large war chests to protect themselves from takeover. If a company wants to avoid a takeover, it can use war chest funds to buy its own stock, wresting control from a company that might try to covertly buy a majority stake. When companies consider hostile takeovers, they tend to seek insight into the funds available for their targets; a large war chest could be seen as a great discouragement.
While this term is generally used to refer to major corporations and governments, there is no reason why ordinary citizens shouldn’t have War Chests as well, although the funds stored there may add up to a much smaller total. Setting aside liquid assets for emergencies is a prudent financial practice and can ensure that funds are always available, even in the event of a catastrophe.
Protect your devices with Threat Protection by NordVPN
