Plain-language definitions for the terms that come up throughout a sale process. No jargon explaining jargon. Where a term has a full guide elsewhere on the site, it's linked below.
A one- or two-page anonymous summary of a business for sale, used to gauge buyer interest before revealing the company’s identity.
The detailed marketing document shared with seriously interested buyers under NDA, covering financials, operations, and growth story.
A confidentiality agreement a prospective buyer signs before receiving detailed information about the business.
A preliminary, non-binding written expression of a buyer’s interest, typically including a proposed valuation range.
A document outlining proposed price and key terms before a full purchase agreement is negotiated.
A binding LOI provision requiring the seller to stop marketing the business or talking to other buyers for a defined period.
A secure, organized repository of business documents made available to a buyer’s team during due diligence.
Earnings before interest, taxes, depreciation and amortization, a common proxy for a business’s core operating cash flow, independent of financing and tax structure.
EBITDA normalized for one-time expenses, above-market owner compensation, and other add-backs to reflect ongoing earning power.
A personal or non-recurring expense run through the business that gets added back to earnings to reflect true operating performance.
The total value of a business’s operations, independent of its capital structure, typically the figure a deal is priced against.
What a seller actually receives: enterprise value adjusted for the business’s debt and cash at closing.
An independent financial analysis, usually buyer-commissioned, that verifies which parts of reported earnings are real and likely to continue.
Current assets minus current liabilities, the operating cash cushion a business needs to run day to day.
The target working capital level set in a purchase agreement, used to calculate a post-closing price "true-up."
A transaction structured as a purchase of specific assets and named liabilities, rather than the company entity itself.
A transaction in which the buyer purchases the seller’s ownership shares directly, acquiring the entire legal entity.
A portion of the purchase price paid later, contingent on the business hitting specific post-closing performance milestones.
A mechanism functionally similar to an earnout, common in pharma and biotech deals, tied to regulatory or product milestones.
A portion of sale proceeds held by a neutral third party for a defined period, to cover potential post-closing claims.
A structure in which the seller reinvests part of their proceeds into the buyer’s (or the combined) entity, retaining partial ownership.
A transaction restructuring a company’s mix of debt and equity, often letting an owner take some chips off the table while retaining a stake.
A firm that runs a structured sale or acquisition process, manages negotiation, and coordinates closing, typically for $5M–$500M transactions.
A firm offering M&A advisory alongside capital markets capability (debt and equity underwriting), typically at larger deal sizes.
An intermediary focused on smaller, often owner-operator businesses, using a listing-based model closer to real estate sales.
A recurring or upfront fee paid to an advisor during the engagement, independent of whether the deal closes.
The advisor’s main compensation, paid as a percentage of transaction value at closing.
A classic success-fee structure charging a declining percentage on successive tranches of transaction value.
A Lehman formula variant with doubled percentages, common on smaller deals where the classic scale would underpay the advisor.
A clause obligating a seller to still pay the advisor’s success fee if they close with a buyer the advisor introduced, even after the engagement ends.
An acquirer already operating in the same or an adjacent industry, often willing to pay a premium for synergies.
An acquirer, typically private equity, buying primarily for financial return rather than operational synergy.
An individual or small team pursuing an acquisition without a committed fund, raising capital deal-by-deal.
Businesses generally valued from roughly $5M to $50M, the segment where most first-time sellers and founder-owned companies sit.
Businesses generally valued from roughly $50M to $500M, sitting between the lower middle market and large-cap transactions.
The process by which a buyer independently verifies the financial, legal, operational, and commercial claims made during marketing.
Factual statements about the business made by the seller in the purchase agreement, on which the buyer relies.
A document listing exceptions to the seller’s representations and warranties, where problems get formally flagged rather than hidden.
A post-closing agreement limiting the seller from competing with, or soliciting employees or customers from, the sold business.
The risk that a business’s value depends heavily on one individual, typically the owner, rather than the business itself.
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