Our M&A Glossary is a valuable resource for anyone seeking to understand the world of corporate transactions, providing clear definitions and explanations of key terms to guide both industry veterans and newcomers through the complexities of mergers, acquisitions, and related topics.
The glossary is organized alphabetically, allowing you to search for a specific term directly in the search field and access its definition instantly.
Impact investing is a strategy that aims to generate positive, measurable social and environmental impact alongside financial returns. It involves directing capital towards organizations and projects that address specific social or environmental challenges.
In a purchase agreement, indemnification provides protection to the buyer if the seller makes representations and warranties that turn out to be inaccurate, or the seller fails to perform a covenant, and the breach results in additional costs or damages to the buyer post-transaction.
An indemnity clause is a contractual transfer of risk between two contractual parties generally to prevent loss or compensate for a loss which may occur as a result of a specified event.
Legal and Regulatory Terms
Similar to a Term Sheet. An indication of Interest (IOI) is a non-binding letter used to express interest in acquiring the business.
This is a document provided by the seller of a business to potential buyers, containing detailed information about the business and the terms of sale.
This is a list of information that a buyer requests from a seller during the due diligence process of an M&A transaction.
An initial public offering (IPO) is the process of offering shares of a private company to the public for the first time, allowing it to become a publicly traded company. It involves the issuance and sale of shares to investors in the primary market.
These are non-physical assets, such as franchises, trademarks, patents, copyrights, goodwill, mineral rights, securities and contracts, that grant rights, privileges, and have economic benefits for the owner.
Integration planning is the process of outlining how and when the combining of the buyer’s and seller’s resources and processes will occur after an M&A deal.
Integration risk management involves identifying, assessing, and mitigating risks that could impact the success of the post-merger integration process.
The integration team is a group of individuals from both the acquiring and target companies who are responsible for managing the post-merger integration process.
Integrative negotiation, also known as collaborative or win-win negotiation, is an approach where parties work together to find mutually beneficial solutions and expand the available resources or value. It emphasizes creating value and fostering long-term relationships.
The Internet of Things (IoT) refers to the network of physical devices, vehicles, appliances, and other objects embedded with sensors, software, and connectivity that enables them to exchange data and connect to the internet.
This is the estimated value of a business using discounted cash
This is a business intermediary for Middle-Market companies who sometimes provides additional services such as bridge loans or underwritings.
A joint venture is a strategic partnership between two or more companies to pursue a specific business opportunity or project. It involves sharing resources, risks, profits, and decision-making, while each company remains a separate legal entity.
When selling a business that occupies leased premises, a buyer typically “assumes” the lease. A tenant may assign his “right, title and interest” in that lease to an “assignee”.
Legal due diligence is the process of collecting, understanding and assessing all the legal aspects of a deal during the due diligence process in M&A.
This is a written statement by a legal professional about the legality or legal implications of a transaction or situation.
Legal risk refers to the potential exposure to legal disputes, litigation, regulatory non-compliance, or other legal challenges that could have adverse financial or reputational consequences. It involves assessing and managing legal obligations and compliance.
This is an industry standard commission rate, which is a sliding scale percent on successive million dollar purchase price brackets.
A Letter of Intent (LOI) is a document declaring the preliminary commitment of one party to do business with another. In M&A, it outlines the terms and conditions of the deal.
This is a document outlining the preliminary terms of a deal between two parties.
This is a transaction in which a company’s capital stock or its assets are purchased with borrowed money, causing the company’s new capital structure to be primarily debt.
An LBO is a deal structure where a company is acquired using a significant amount of borrowed money, with the assets of the company being acquired often used as collateral for the loans.
This is a charge or hold on assets usually by a creditor until the indebtedness is satisfied.
This is an acronym for the Last In, First Out inventory valuation method. The last inventory units purchased are considered to be the first sold.
These are terms that limit the amount of liability a party can be held responsible for in a contract.
A local business is a business that primarily serves the local community, often operating within a specific geographical area. Local businesses contribute to the local economy and community development.
This is a deadline by which all conditions of a transaction must be fulfilled, otherwise the transaction may be terminated.
This is a provision in a contract that allows a party to back out of a deal if there is a significant negative change in the business being acquired.
Machine learning is an application of artificial intelligence that enables systems to learn and improve from experience without being explicitly programmed. It involves algorithms that can analyze data, identify patterns, and make predictions or decisions.
This generally defines firms with revenues below $5 million.
An MBO is a transaction where a company’s management team purchases the assets and operations of the business they manage.
This is a way of determining a value indication of a business using one or more methods that compare relevant characteristics of the subject firm to similar businesses that have sold.
This is an abbreviation of “market capitalization” that applies to a public company’s worth in the stock market by multiplying the total number of shares outstanding by the current stock price.
Market penetration is a strategy for growth where a business aims to increase its market share within an existing market segment. It typically involves capturing a larger customer base or increasing sales to existing customers.
Market risk is the risk of loss due to changes in market conditions, such as price volatility, interest rates, exchange rates, or economic factors. It affects the value of investments or the performance of a business.
A MAC clause is a provision in a contract that allows a buyer to back out of a deal if the seller experiences a significant negative event that might affect its value.
These are types of buyouts: Management Buyout (MBO) is when a company’s management team purchases the assets and operations of the business; Management Buy-In (MBI) is when an outside management team buys in; Leveraged Buyout (LBO) is when a company is purchased with a significant amount of borrowed money.
This is a non-binding agreement between two or more parties outlining the terms and details of an understanding, including each parties’ requirements and responsibilities.
A merger is a business strategy that involves the combination of two or more companies into a single entity. It’s typically done to expand a company’s reach, increase market share, or gain synergies.
A merger of equals is a combination of two companies of similar size, strength, and influence to form a new entity. It involves a collaborative approach where both companies contribute equally to the merged entity’s governance, management, and operations.
This occurs when the purchasing company acquires all of the target company shares/assets; the target company ceases to exist (acquirer survives).
This is subordinated to senior debt, it is like a second mortgage, with higher interest rates and often with common stock purchase warrants.
Mezzanine financing is a hybrid form of financing that combines elements of debt and equity. It typically involves subordinated debt with equity-based features, such as warrants or convertible securities. Mezzanine financing provides a flexible capital structure and can be used to support growth, acquisitions, or buyouts.
A microbusiness is a very small-scale business with a minimal number of employees and often low revenue. Microbusinesses are typically owner-operated and have limited resources.
Negotiation deadlock refers to a situation where parties reach an impasse or inability to reach an agreement during negotiations. It can occur due to conflicting interests, strong positions, or an inability to find common ground. Overcoming deadlock often requires creative problem-solving or involving a mediator.
A negotiation strategy is a planned approach to achieve the desired outcome in a negotiation. It involves setting objectives, identifying priorities, assessing risks, and developing tactics for effective negotiation.
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