1. Acquisition

An acquisition occurs when one company purchases most or all of another company’s shares to gain control. This transaction can be friendly or hostile and can involve a variety of payment forms, including cash, stock, or a combination.

2. Acquisition Premium

The acquisition premium is the extra amount paid over the target company’s market value to secure the acquisition. It reflects the expected synergies, strategic benefits, or competitive advantages that the acquirer believes the transaction will generate.

3. Anti-Dilution Clause

An anti-dilution clause protects existing shareholders from dilution if new shares are issued at a lower price. This is especially important for early investors and can be triggered in financing rounds where the share price falls.

4. Anti-Greenmail Provision

An anti-greenmail provision is a clause preventing a company from buying back its shares from a hostile party at a premium. It helps discourage “greenmail,” where raiders attempt to force a buyout for short-term gains.

5. Anti-Takeover Defense

Anti-takeover defenses are strategies to prevent hostile takeovers, such as poison pills, staggered boards, and golden parachutes. These defenses make it difficult or less attractive for an acquirer to gain control.

6. Auction Process

The auction process is a structured sale method, where multiple buyers are invited to submit bids. This competitive process aims to maximize the sale price, often involving rounds of bids and negotiations.

7. Basket and Cap Provisions

Basket and cap provisions in M&A agreements set thresholds for indemnity claims. The basket represents a minimum amount of damages before claims can be made, and the cap limits the maximum liability.

8. Best Efforts Clause

A best efforts clause requires a party to make all reasonable attempts to meet their obligations. It’s often included in financing provisions, though it does not guarantee an outcome.

9. Black Knight

A black knight is an acquirer who makes an unsolicited and often aggressive bid for control of a target company, typically with no collaboration intentions, prompting the target to seek defenses.

10. Bridge Loan

A bridge loan is a temporary financing option used to cover short-term needs, often for buyers needing funds to complete an acquisition before securing permanent financing.

11. Breakup Fee

A breakup fee is a penalty paid by the target if they abandon the deal for a competing offer. It compensates the initial bidder for time, due diligence, and lost opportunities.

12. Buy-In

A buy-in involves an external investor or company acquiring a significant stake, often with plans to influence management or strategic decisions.

13. Buy-Side and Sell-Side Advisors

Buy-side advisors assist the acquirer in evaluating and negotiating the acquisition, while sell-side advisors represent the target company, preparing it for sale and marketing to buyers.

14. Capital Structure

Capital structure is the mix of debt and equity a company uses to finance operations and growth. In M&A, it’s crucial to assess the target’s structure to ensure the deal is feasible.

15. Carve-Out

A carve-out involves selling or spinning off a specific division or business segment to streamline operations or raise capital without selling the entire company.

16. Change of Control Clause

This clause in contracts specifies actions if ownership changes, such as allowing counterparties to terminate or renegotiate agreements.

17. Closing Conditions

Closing conditions are requirements that must be met before a deal is finalized. They may include regulatory approvals, due diligence results, and financing arrangements.

18. Completion Risk

Completion risk is the possibility that a deal will fail to close due to issues such as regulatory obstacles, financing problems, or material adverse changes.

19. Confidential Information Memorandum (CIM)

A CIM provides detailed information about the target’s financials, operations, and strategy to potential acquirers, helping them evaluate the business before making an offer.

20. Consideration

Consideration is the form of payment in an M&A transaction. It can be cash, stock, debt, or a combination and impacts the tax implications and valuation of the deal.

21. Contingent Value Rights (CVRs)

CVRs are issued to shareholders, granting them the right to additional payments based on specific future events or performance milestones after the acquisition.

22. Control Premium

The control premium is the extra amount an acquirer pays over the market price to gain a controlling interest, compensating shareholders for relinquishing control and potential synergies.

23. Corporate Raider

A corporate raider is an investor who targets undervalued companies for hostile takeovers, often aiming to restructure or sell assets to increase value.

24. Covenant

Covenants are clauses in loan agreements or contracts that specify certain actions the parties must follow, such as maintaining financial ratios, restricting dividends, or limiting additional debt.

25. Crown Jewel Defense

In a crown jewel defense, the target company sells its most valuable assets to reduce appeal to the hostile bidder, thus complicating the takeover.

26. Data Room

A data room, often digital, stores confidential information about the target company and is used by the acquirer during due diligence to review key documents.

27. Deferred Payment

A deferred payment structure delays part of the purchase price until post-closing, contingent on future milestones or performance goals.

28. Discounted Cash Flow (DCF) Analysis

DCF analysis is a valuation method estimating the present value of future cash flows, widely used to determine if a target’s price aligns with its intrinsic value.

29. Drag-Along Rights

Drag-along rights allow majority shareholders to compel minority shareholders to sell their shares, facilitating smoother ownership transfers.

30. Due Diligence

Due diligence is a thorough investigation conducted by the buyer to assess the target’s financial health, operations, liabilities, and risks before finalizing the deal.

31. Earn-In

An earn-in allows a buyer to gradually gain ownership based on meeting certain financial or operational milestones, aligning the seller’s incentives with the business’s performance.

32. Earn-Out

An earn-out provision ties part of the payment to the future performance of the acquired business, incentivizing the seller to achieve specific targets post-transaction.

33. Earn-Out Escrow

Earn-out escrow holds the earn-out funds separately, releasing them only after performance conditions are met, providing security for both buyer and seller.

34. Enterprise Value (EV)

Enterprise value is the total value of a company, including equity and debt, less cash. It provides a more comprehensive valuation metric than market cap alone.

35. Equity Carve-Out

An equity carve-out involves creating a new public company from a subsidiary by offering shares in an IPO while retaining some ownership in the parent company.

36. Escrow Holdback

An escrow holdback is a portion of the purchase price held temporarily in escrow to cover any post-closing adjustments or indemnification claims.

37. Exclusivity Period

During an exclusivity period, the target agrees not to engage with other potential buyers, giving the selected bidder a chance to finalize terms without competing offers.

38. Financing Contingency

A financing contingency allows the buyer to exit the deal if they cannot secure the necessary funding, reducing risk for buyers needing outside financing.

39. Form of Consideration

This refers to the method of payment in an M&A transaction, such as cash or stock, with each having tax, control, and dilution implications.

40. Golden Parachute

A golden parachute is a clause providing lucrative benefits to executives if they lose their positions post-acquisition, often used as an anti-takeover defense.

41. Greenmail

Greenmail occurs when a target repurchases shares from a hostile acquirer at a premium to prevent a takeover, allowing the company to remain independent.

42. Hart-Scott-Rodino Act (HSR)

The HSR Act requires that large transactions be reported to U.S. antitrust agencies for review, ensuring that mergers do not reduce competition.

43. Horizontal Integration

Horizontal integration is the acquisition of companies within the same industry and level of production to increase market share and reduce competition.

44. Indemnification Cap

An indemnification cap limits the seller’s liability for claims made after the sale, often set as a percentage of the purchase price to manage post-deal risk.

45. Internal Rate of Return (IRR)

IRR is a calculation used to measure the profitability of an investment. In M&A, it helps determine if the return on the acquisition justifies the price.

46. Investment Bank

Investment banks advise clients in M&A by identifying targets, valuing businesses, structuring deals, and providing financing.

47. Joint Venture

A joint venture is a partnership where two companies combine resources to pursue shared objectives without merging, often to enter new markets or share risk.

48. Key Employee Retention

In M&A, key employee retention involves providing incentives for critical employees to stay through the transition, ensuring continuity and stability.

49. Letter of Intent (LOI)

The LOI is a non-binding document that outlines the main terms of the transaction, setting the stage for further negotiations and due diligence.

50. Leveraged Buyout (LBO)

An LBO is a type of acquisition where a significant portion of the purchase price is financed with debt, with the target’s cash flows used to repay it.

51. Leveraged Recapitalization

In a leveraged recapitalization, a company takes on debt to pay dividends or buy back shares, often to deter hostile takeovers by increasing debt on its balance sheet.

52. Locked-Box Mechanism

A locked-box mechanism in M&A fixes the purchase price based on an agreed balance sheet date, with no further adjustments, providing price certainty for both parties.

53. Management Buy-In (MBI)

An MBI involves outside managers acquiring control of a business, usually backed by investors. This new management team takes over operations to drive growth or restructuring.

54. Management Buyout (MBO)

An MBO is a transaction in which the company’s management team acquires a significant portion of the business from the existing owners, often to gain more control over operations.

55. Management Presentation

A management presentation is a detailed briefing by the target company’s management team, typically given to potential acquirers to showcase business operations and growth prospects.

56. Market Capitalization (Market Cap)

Market cap is the total value of a company’s outstanding shares. It’s a quick measure of company size but does not consider debt, cash, or potential M&A premiums.

57. Material Adverse Change (MAC) Clause

A MAC clause allows the buyer to back out if there are significant negative changes in the target’s business, finances, or industry, offering protection against unforeseen risks.

58. Merger

A merger is the combination of two companies into a new entity or one company, often to create synergies, expand markets, or gain strategic advantages.

59. Merger Arbitrage

Merger arbitrage is an investment strategy where traders buy the target’s stock and potentially short the acquirer’s stock, betting on the successful completion of the deal and price convergence.

60. Minority Shareholder Rights

Minority shareholder rights protect non-controlling shareholders in transactions. These may include voting rights, rights to dividends, or buyout provisions in mergers.

61. Multiple

Multiples are valuation metrics that compare a company’s price with a financial metric, like EBITDA or earnings, providing quick benchmarks for assessing value in M&A.

62. Net Debt Adjustment

A net debt adjustment modifies the purchase price based on the target’s debt and cash position at closing, reflecting the company’s true value without outstanding liabilities.

63. No-Shop Clause

A no-shop clause prohibits the target from soliciting other offers after signing an agreement with a particular buyer, preventing deal competition.

64. Non-Compete Agreement

In M&A, a non-compete restricts the seller from entering certain markets or businesses for a period post-transaction to protect the buyer’s investment.

65. Non-Disclosure Agreement (NDA)

An NDA is a legally binding contract that prevents parties from disclosing sensitive information, essential during due diligence to safeguard competitive information.

66. Non-Solicitation Clause

A non-solicitation clause prohibits one party from recruiting the other party’s employees or clients, providing protection against talent poaching post-deal.

67. Overlap or Overlap Value

Overlap refers to common business areas between the acquirer and target. These overlaps can create synergies but may also attract regulatory scrutiny for anti-competitive concerns.

68. Piggyback Rights

Piggyback rights allow minority shareholders to sell their shares alongside major shareholders in a future sale, providing them liquidity and exit opportunities.

69. Poison Pill

A poison pill is an anti-takeover measure allowing existing shareholders to purchase shares at a discount if an acquirer exceeds a threshold, diluting the acquirer’s stake.

70. Precedent Transaction Analysis

Precedent transaction analysis examines prices paid in similar past transactions to estimate a fair value for the target, providing market-based valuation benchmarks.

71. Price-to-Earnings (P/E) Ratio

The P/E ratio measures a company’s stock price relative to its earnings per share. In M&A, it’s used to assess the target’s valuation against industry averages.

72. Proxy Fight

A proxy fight occurs when an acquirer attempts to gain control of a company by persuading shareholders to vote for their candidates on the board, bypassing management.

73. Purchase Price Allocation (PPA)

PPA is the process of assigning the purchase price to the acquired assets and liabilities, required for accounting and tax purposes after an acquisition.

74. Ratchet Provision

A ratchet provision in M&A ensures early investors maintain ownership percentages by issuing additional shares if the company’s valuation drops in later financing rounds.

75. Regulatory Approval

Regulatory approval is the authorization needed from government bodies before a transaction can close, particularly in sensitive industries to prevent anti-competitive impacts.

76. Regulatory Filings

Regulatory filings include documentation that companies submit to regulators, detailing deal terms, shareholder impact, and anti-trust implications to ensure compliance.

77. Reps and Warranties (Representations and Warranties)

Reps and warranties are statements about the target’s condition, such as financials or legal matters, that the buyer relies on. Breaches can lead to post-closing claims.

78. Retention Bonus

A retention bonus is an incentive paid to key employees to stay through the M&A process, preventing destabilization from turnover and ensuring continuity.

79. Retention Holdback

A retention holdback is a portion of the purchase price withheld until key employees remain for a specified time, motivating them to support the transition.

80. Return on Investment (ROI)

ROI measures the profitability of an investment, calculated as the gain from investment divided by its cost, helping acquirers assess the expected return from the acquisition.

81. Reverse Breakup Fee

A reverse breakup fee is a penalty paid by the acquirer if the deal falls through, often due to financing issues or failure to obtain regulatory approval.

82. Reverse Merger

In a reverse merger, a private company merges with a public company, gaining public listing benefits without undergoing a traditional IPO process.

83. Reverse Termination Fee

A reverse termination fee requires the buyer to compensate the seller if they abandon the transaction, providing some financial recourse to the target.

84. Right of First Refusal (ROFR)

ROFR gives a party the right to purchase an asset before it’s offered to others, often used in shareholder agreements to maintain control over ownership changes.

85. Roll-Up

A roll-up is a strategy of consolidating smaller companies in the same industry, creating a larger entity with greater market power, economies of scale, and valuation.

86. Securities and Exchange Commission (SEC)

The SEC is the U.S. regulatory body overseeing public company disclosures, mergers, and securities transactions, ensuring transparency and fairness in the market.

87. Sell-Side

Sell-side refers to parties or advisors representing the seller, helping to prepare the business, market it to buyers, and negotiate favorable deal terms.

88. Shareholder Rights Plan

A shareholder rights plan, or poison pill, dilutes shares to make hostile takeovers more difficult, giving existing shareholders rights to purchase shares at a discount.

89. Shareholders’ Agreement

A shareholders’ agreement is a contract outlining rights and obligations among shareholders, such as voting rights, transfer restrictions, and dividend policies.

90. Squeeze-Out

A squeeze-out is a transaction forcing minority shareholders to sell their shares, typically at a premium, to achieve full ownership or simplify company control.

91. Standstill Agreement

A standstill agreement prevents an acquirer from increasing their stake in the target for a specified period, often used to give both sides time to negotiate.

92. Stock Swap

In a stock swap, the acquirer uses its stock as consideration instead of cash, allowing the target’s shareholders to exchange their shares for acquirer shares.

93. Strategic Buyer

A strategic buyer acquires companies for long-term integration, focusing on synergies, operational efficiencies, and competitive positioning, rather than short-term gain.

94. Strategic Fit

Strategic fit refers to the alignment of the target with the acquirer’s goals, such as technology, customer base, or geography, which can drive M&A motivations.

95. Synergies

Synergies are cost savings, revenue boosts, or strategic benefits realized when combining two companies, often a primary reason behind M&A transactions.

96. Tag-Along Rights

Tag-along rights allow minority shareholders to sell their shares alongside majority shareholders in a third-party sale, ensuring equal exit opportunities.

97. Takeover

A takeover is the acquisition of one company by another, which can be friendly or hostile, depending on whether the target’s management supports the acquisition.

98. Takeover Bid

A takeover bid is an offer by an acquirer to buy shares directly from shareholders, usually at a premium, often used in hostile takeovers when board cooperation is lacking.

99. Tender Offer

A tender offer is a public offer to buy shares from shareholders at a premium, often as part of a takeover or buyback strategy, contingent on acquiring a majority.

100. Termination Fee

A termination fee is a penalty paid if one party withdraws from the transaction, compensating the other party for lost time and due diligence efforts.

101. Transaction Advisors

Transaction advisors include financial, legal, tax, and regulatory consultants assisting with M&A deals, providing valuation, negotiation, and structuring expertise.

102. Transaction Services Agreement (TSA)

A TSA allows the buyer to receive services from the seller post-closing, supporting transition activities such as IT, HR, and finance while the buyer builds capacity.

103. Vertical Integration

Vertical integration involves acquiring companies within different production stages in the same industry, allowing control over the supply chain and cost efficiencies.

104. Virtual Data Room (VDR)

A VDR is an online repository for confidential documents, used during due diligence in M&A to securely share information with potential buyers.

105. Walk-Away Price

The walk-away price is the maximum price a buyer is willing to pay or the minimum price a seller will accept, setting boundaries to prevent overpaying or underselling.

106. White Knight

A white knight is a friendly buyer who steps in to acquire a target company to prevent a hostile takeover by a black knight, often preserving management’s position.