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.
Negotiation tactics are specific techniques or actions used to influence, persuade, or achieve desired outcomes in a negotiation. Examples of tactics include anchoring, framing, making concessions, using deadlines, or appealing to emotions.
This is the book value of assets minus book value of liabilities.
This is a form of cash flow. When the term is used, it should be supplemented by a qualifier and a definition of exactly what it means in the given context.
This is often based on the value of assets and liabilities at their true (market) value, not necessarily as expressed on the balance sheet, and may include the value of intangibles and goodwill not shown on the balance sheet.
These are clauses in a contract that prevent a party from competing with the business or soliciting its customers
This is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to by third parties.
A non-disclosure agreement (NDA) is a legal contract that establishes confidentiality between parties involved in an M&A transaction. It protects sensitive information from being disclosed to third parties and sets the terms and restrictions on information sharing.
These are assets not necessary to ongoing operations of the business enterprise.
This is the process of adjusting or “normalizing” financial statements to remove the influence of decisions made by the owners to minimize taxes and to recast or restate them in such a way as to depict the economic performance and condition of the company from the perspective of an investor.
These are unrecorded obligations, such as repurchase agreements, pending lawsuits, and unfunded pensions.
This is the price offered per share by the acquirer.
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, or systems, or from external events. It includes risks related to efficiency, security, compliance, and business continuity.
These may include due diligence fees, legal fees, accounting fees, etc., related to the deal.
An owner-operator is an individual who owns and operates a small business, typically playing a hands-on role in day-to-day operations.
This is an acronym for Private Equity Group.
These are owner benefits incidental to a regular salary or dividends, such as personal use of a company automobile, country club membership, and personal entertainment.
Political risk refers to the risk of financial, operational, or reputational losses arising from political factors, such as changes in government policies, regulations, geopolitical events, or social instability. It affects businesses operating in
Post-Merger Integration (PMI) is the process of combining and rearranging businesses after a merger or acquisition to extract synergies to achieve the deal’s desired value.
Post-merger IT integration involves merging the IT systems and processes of the acquiring and target companies, which can include hardware, software, data, and IT staff.
Power dynamics in negotiation refer to the relative influence, leverage, or control one party has over the other. It can be based on factors such as expertise, resources, market position, or alternatives. Understanding power dynamics helps in strategizing and balancing negotiation outcomes.
This is a lending institution that has met the Small Business Administration’s necessary experience and quality requirements and is given “preferred” status, allowing it to make lending decisions on behalf of the SBA.
This is the inverse of a capitalization rate.
The price-earnings ratio (P/E ratio) is a valuation metric used to assess the relative value of a company’s stock. It compares the market price per share to the company’s earnings per share, indicating how much investors are willing to pay for each dollar of earnings.
Private equity is a type of investment in privately held companies or public companies that will be taken private. Private equity firms pool capital from investors, acquire ownership stakes in companies, and actively manage and grow their investments before seeking a profitable exit.
This is financial information that has been adjusted to reflect certain events or hypothetical scenarios.
This is the number of shares outstanding after the transaction has closed and additional equity has been issued.
Profit share is an arrangement where parties agree to distribute a portion of generated profits between them. It can be based on a percentage or predefined formula and is often used in partnership or profit-sharing agreements.
The Purchase Agreement is the contract that finalizes all terms and conditions in the buying/selling of a company. It’s signed after due diligence is completed.
This is the breakdown of the total purchase price between net identifiable assets and goodwill.
These are assessments of the reliability and sustainability of a company’s reported earnings.
This is another term for normalization, which involves adjusting financial statements to depict the economic performance and condition of a company from the perspective of an investor.
Regulatory approval is the permission granted by a regulatory body for a company to proceed with a proposed action, such as a merger or acquisition.
Renewable energy refers to energy derived from sources that are naturally replenished, such as solar, wind, hydro, and geothermal power. Investing in renewable energy supports the transition to cleaner and more sustainable energy sources.
Representations and warranties are statements of fact in relation to the company being sold, given by the seller to the buyer on closing, and serve to allocate risk between the parties.
These are statements of fact made by one party to another party in a contract.
Reputational risk is the risk of damage to a company’s reputation or brand value due to negative public perception, customer dissatisfaction, or other factors. It can have significant financial and operational impacts.
These are any fees or charges related to early debt repayments that are part of a restructuring.
This is an amount of money held back from the purchase price in an M&A transaction to cover potential future liabilities.
ROI is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.
These are increases in revenue that are expected due to cross-selling, up-selling, pricing changes, etc.
Revenue share is an agreement where parties agree to distribute a portion of generated revenue between them. It can be a percentage-based arrangement and is often used in joint ventures, partnerships, or licensing agreements.
Risk assessment is the process of identifying, evaluating, and prioritizing potential risks or uncertainties that could affect the success of a project, investment, or business. It helps in developing strategies to mitigate or manage those risks.
Robotic process automation (RPA) refers to the use of software robots or bots to automate repetitive and rule-based tasks or processes. It improves efficiency, accuracy, and productivity by reducing manual efforts.
These are acronyms for Return on Investment and Return on Equity. They must be greater than the cost of capital in order to create shareholder value.
This is the amount of equity retained by the selling shareholder(s), measured as a percentage of total equity of the new company and the dollar value of equity retained.
Mostly used in the USA. This is a common business term to distinguish a corporation whose profits are passed through to shareholders (without a corporate level tax imposed) and taxed on their personal returns under subchapter S of the Internal Revenue Code.
Mostly used in the USA. This is a federal agency, created in 1953, that grants or guarantees long-term loans to small businesses.
Mostly used in the USA. These are loans made to buyers of small businesses by banks or other qualified financial institutions and guaranteed by the Small Business Administration of the U.S. Government.
A secondary offering is the sale of additional shares by a publicly traded company after its initial public offering (IPO). It can involve the issuance of new shares by the company or the sale of existing shares by insiders or existing shareholders.
This is the earnings of a business before the owner’s salary, interest expense, income taxes, depreciation, and amortization. It’s a common financial metric used in the valuation of small businesses.
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