M&A Terminology: Succinct Explanations

1. Acquirer / Buyer / Investor

The company initiating the purchase of another business. Seeks strategic growth through acquiring businesses that complement its existing operations and market position.

2. Target Company / Seller

The business being pursued for potential acquisition. Represents an opportunity for strategic expansion, technological advancement, or market penetration.

3. Valuation

The process of determining a company's economic worth through comprehensive financial analysis. Involves assessing current performance, future potential, and market comparables to establish a fair transaction price.

4. Non-Disclosure Agreement (NDA)

A legal contract protecting confidential information shared during business negotiations. Establishes boundaries and consequences for unauthorized information disclosure.

5. Purchase Agreement

The comprehensive legal document finalizing all terms of a business transaction. Defines precise financial, legal, and operational conditions of the merger or acquisition.

6. Term Sheet / Letter of Intent (LOI)

A preliminary, non-binding document outlining key transaction terms and conditions. Serves as a framework for detailed negotiations and demonstrates serious intent to complete a deal.

7. EBITDA: Earnings Before Interest Tax Depreciation and Amortisation

A financial metric measuring a company's operational profitability before accounting adjustments. Provides a standardized view of earning potential by removing financial and accounting variations.

8. Net Debt

The total financial debt minus cash and cash equivalents. Offers a clear picture of a company's true financial leverage and overall financial health.

9. Earnout

A payment mechanism that links a portion of the purchase price to future business performance. Bridges valuation gaps and aligns seller's interests with post-transaction success.

10. Representations and Warranties

Formal statements declaring the condition and status of a business being sold. Provide legal protection by ensuring transparency and allocating potential risks between buyer and seller.

11. Controlling Stake

Ownership exceeding 50% of a company's voting shares. Provides the ability to make strategic decisions and control corporate governance.

12. Synergies

The additional value created when two businesses combine their capabilities. Represents potential cost savings, revenue enhancements, and strategic advantages.

13. Acquisition Multiple

A measure of the valuation of the business as a multiple of the agreed financial metric.

14. Due Diligence

A comprehensive investigation of a target company's financial, legal, and operational status. Validates the strategic rationale and identifies potential risks in a potential transaction.

15. Closing

The date when the agreement is executed and payment and ownership changes.

Conclusion

These concise definitions capture the essence of key M&A terminologies, providing a quick reference for understanding complex business transaction concepts.