M&A Jargon

M & A (Mergers and Acquisitions) – Acronyms, Terms and Jargon
Term Definition
Accretion The process through which the value of a company or investment increases over time, often due to mergers or acquisitions.
Acqui-hire A type of acquisition where a company is primarily interested in hiring the talent and expertise of the target company’s employees.
Acquisition The process through which one company purchases a controlling interest in another company, gaining control over its operations and assets.
Asset Purchase Agreement APA A contract outlining the terms and conditions of the purchase and sale of specific assets of a business.
BATNA A best alternative to a negotiated agreement (BATNA) is a course of action that a party engaged in negotiations has determined should be taken if talks fail and no agreement can be reached. A BATNA is often used as an evaluation tool when considering an offer from a buyer.
Break Fee A fee paid by one party to another in the event that a proposed transaction, like a merger, does not go through as planned.
CAGR (Compound Annual Growth Rate) A measure of an investment’s annual growth rate over time with the effect of compounding taken into account. The compound annual growth rate (CAGR) is the rate of return (RoR) that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each period of the investment’s life span.
Carve-Out The process of separating a subsidiary or division from a larger company and operating it as an independent entity.
CIM – Confidential Information Memorandum A comprehensive document prepared by a seller to provide detailed information about a business to potential buyers while maintaining confidentiality. The CIM typically provides business information such as past finanicial performance, future projections, market analysis and operational details about the business. It is provided to potential acquirers so that they may evaluate a business and determine If they are interested in the business as an acquisition target.
Clean Team A team of professionals who review sensitive information during due diligence without sharing non-public information with the buyer.
Closing Agenda A structured outline or plan detailing the steps, documents, and actions that need to occur during the closing of a business deal.
Comparable Transactions Previous transactions or deals that are used as a basis for evaluating the value or terms of a current or prospective transaction.
Cost of Acquisition (COA) The total expenses incurred to acquire a new customer or an asset, often including marketing, sales, and operational costs.
Crown Jewel The most valuable and strategic assets of a company, often targeted by potential acquirers in the event of a takeover attempt.
Customer Concentration The extent to which a company relies on a small number of customers for a significant portion of its revenue.
DCF – Discounted Cash Flow A valuation method that estimates the present value of future cash flows, often used to assess the worth of an investment.
Deal Structuring The process of determining the terms, conditions, and financial arrangements for a merger, acquisition, or other business deal.
Definitive Agreement A legally binding agreement that outlines the terms and conditions of a transaction and sets forth the obligations of the parties.
Due Diligence (DD) The comprehensive assessment and investigation of a company’s financial, legal, and operational aspects before a transaction occurs.
Due Diligence Checklist A comprehensive list of items and information that should be reviewed during the due diligence process of a potential transaction.
Earnout A contractual arrangement where additional payments are made to the seller if certain performance targets are met after an acquisition.
EBITDA Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company’s operating performance and profitability. Valuations are often based upon a multiple of EBITDA.
Executive Summary A concise overview that highlights the key points and critical aspects of a business proposal, report, or plan.
Exit Strategy A plan outlining how investors or stakeholders will exit their investment in a company, often through a sale or public offering.
Expression of Interest (EOI) a formal document or communication expressing a party’s initial interest in a particular opportunity, such as a business transaction or a project. It outlines a party’s intention to further explore and potentially engage in negotiations or discussions regarding the opportunity. An EOI is typically less binding than a formal contract and serves as a preliminary step in the decision-making process.
Fairness Opinion A professional assessment of the fairness of a transaction’s financial terms, usually provided by an independent valuation expert.
Family Office A private wealth management advisory firm that serves ultra-high-net-worth individuals or families.
Financial Buyer A type of buyer in a business transaction that is primarily interested in the financial returns and potential of the target company.
Fire Sale The quick sale of assets at a steep discount, usually due to financial distress or urgent need for liquidity.
Going Concern An assumption in financial reporting that a business will continue to operate indefinitely, without the intention of liquidation.
Golden Parachute A financial arrangement that provides generous benefits to executives in the event of a change in control or termination.
Goodwill An intangible asset that represents the excess of the purchase price over the fair market value of net assets acquired in a merger.
Greenfield Investment The establishment of a new business or project in a foreign country, typically involving the construction of new facilities.
Holdback A portion of the purchase price that is withheld by the buyer for a specified period, often to cover potential undisclosed liabilities.
Horizontal Merger A merger between companies operating in the same industry and at the same stage of the supply chain.
Hostile Takeover An acquisition that occurs when a company’s management opposes the acquisition but is pursued by the acquiring party.
Integration The process of combining the operations, systems, and resources of two merging companies to achieve desired synergies.
Integration Manager An individual or team responsible for overseeing the integration process after a merger or acquisition.
Integration Plan A detailed strategy outlining how two merging companies will combine their operations, systems, and resources for maximum benefit.
IPO Initial Public Offering; the first sale of a company’s stock to the public, allowing it to become publicly traded.
Joint Venture A business arrangement where two or more parties agree to collaborate and contribute resources to achieve a specific goal.
Letter of Intent (LOI) a formal document that outlines the preliminary agreement between parties in a business transaction. It expresses the intention to proceed with negotiations and details the key terms and conditions of the deal. While not legally binding in all aspects, an LOI serves as a blueprint for the final agreement and helps to establish a framework for the transaction.
Leveraged Buyout (LBO) A transaction where a company is acquired using a significant amount of debt, which is often secured by the company’s assets.
Lifetime Value (LTV) The predicted net profit attributed to the entire future relationship with a customer, taking into account retention and spending patterns.
“TTM null
Trailing 12 Months” Trailing Twelve Months; a financial metric that covers the performance of a company over the most recent twelve-month period.
Majority Interest the ownership stake in a company or organization that represents more than 50% of the total ownership. When an individual or entity holds a majority interest, they have control over decision-making processes and can typically determine the direction and policies of the company. This control is significant because it allows the majority owner to make key strategic decisions, such as electing the board of directors and approving major corporate actions, without being overruled by minority stakeholders.
MAC Clause Material Adverse Change Clause; a provision allowing a party to terminate a deal if significant negative events occur.
Merger The combination of two or more companies into a single entity, often with the goal of improving efficiency and competitiveness.
Minority Interest Ownership stake in a company that doesn’t provide control, typically held by individuals or entities owning less than 50%.
Non-Compete Agreement A contract in which one party agrees not to enter into or start a similar business in competition with the other party.
Non-Disclosure Agreement (NDA) A legal contract that outlines the sharing of confidential information while restricting its use by the receiving party.
Non-Recurring Revenue Revenue that is not expected to continue in the future, often arising from one-time events or irregular transactions.
Poison Pill A defensive strategy used by a target company to deter hostile takeovers by making the acquisition financially unattractive.
Private Equity (PE) Funds invested in private companies or assets with the goal of acquiring, investing in, or growing the value of those entities.
Private Equity (PE) Firm a type of investment management company that pools together capital from various sources, such as high-net-worth individuals, pension funds, and institutional investors. The primary objective of a private equity firm is to invest in and acquire ownership stakes in private companies or, in some cases, take public companies private.
Pro Forma Financial statements that project the potential results of a proposed transaction, providing a snapshot of the expected future state.
Proxy Contest A battle for control of a company’s board of directors through soliciting proxy votes from shareholders.
Purchase Price The amount of money or consideration paid by the buyer to acquire the target company or its assets.
Quality of Earnings (QOE) An assessment of the sustainability and reliability of a company’s earnings, often used in due diligence processes for acquisitions.
Reps and Warranties Statements made by the seller about the accuracy of information provided in the sale of a business, offering certain protections. Reps (Representations) and warranties provide the assertion of the fact for closing the deal of sale of the business and repay all the statements of facts and provide the mitigation of losses that may occur in the future of the business. It is one of the essential parts of an M&A agreement for which professionals and advisors are hired for the job.
Restructuring The process of making significant changes to a company’s structure, operations, or financial arrangements to improve performance.
Retention Bonus Additional compensation provided to key employees to encourage them to stay with a company through a period of change.
Reverse Merger A transaction where a private company acquires a public company, allowing the private company to become publicly traded.
Roll-Up (Merger) The consolidation of multiple smaller companies in the same industry into a larger entity, often with the goal of improving efficiency.
RR – Recurring Revenue Revenue that a company can predictably expect to receive at regular intervals in the future, often through subscription-based models.
Schedules Supplementary documents or attachments to a contract or agreement that provide additional details, specifications, or explanations.
Search Fund an investment strategy led by entrepreneurs who raise funds to acquire and manage existing companies. They focus on identifying a suitable business, taking on operational roles, and ultimately aiming for growth and profitability before an eventual exit. Investors participate in the success of the acquired company through returns on investment.
Seller’s Market A market condition where sellers have the advantage due to high demand and limited supply, often leading to higher prices.
Share Purchase Agreement (SPA) A legal document that outlines the terms and conditions of a share purchase, including the sale price and conditions.
Shareholder Value The creation of value for a company’s shareholders, often measured through stock price appreciation and dividend payments.
Spin-Off The creation of a new, independent company through the distribution of shares in an existing company’s subsidiary to its shareholders.
Standalone Value The value of a business or asset if it were to operate independently, without considering potential synergies from a merger.
Standstill Agreement A contract in which one party agrees not to take certain actions, often used in the context of a potential acquisition.
Strategic Alliances Collaborative agreements between companies to pursue mutual benefits, often without forming a new legal entity.
Strategic Buyer A buyer who acquires another company based on the potential synergies and benefits the acquisition can bring to their own operations.
Strategic Fit The compatibility between two companies in terms of their products, markets, operations, and overall business goals.
Synergy The additional value created when two companies merge, leading to increased efficiency, cost savings, and enhanced competitiveness.
Tangible Assets Physical assets with a definite monetary value, such as property, equipment, and inventory, excluding intangible assets.
Target Company “The company that is the subject of an acquisition attempt, often referred to as the “”target”” in a merger or acquisition context.”
Total Addressable Market (TAM) The total market demand for a product or service that is calculated based on various factors including customer needs and competition.
Transaction Costs The expenses associated with executing a business deal, including legal fees, advisory fees, and other related expenses.
Tuck Under efers to a situation where a smaller company, typically with complementary products or services, is acquired by a larger company and then integrated into an existing division or business unit.
Valuation The process of determining the economic value of an asset, company, or investment.
Vertical Merger A merger between companies operating at different stages of the same supply chain or industry.
White Knight A friendly third party that enters an acquisition scenario to protect the target company from a hostile takeover attempt.
Working Capital The capital used in day-to-day trading operations, calculated as current assets minus current liabilities.

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