Half the battle in being an M&A advisor is understanding the jargon, abbreviations and acronyms.
Here are some of the must-knows:
Acronym
Meaning
Description
OldCo
Old Company
Usually referring to the seller. when the seller only divests a part of its business and the old company continues to trade.
NewCo
New Company
The new company that will be formed after the acquisition
PE
Private Equity
Usually referring to a private equity firm (such as Exponent). Private equity firms act as both buyers and seller. PE usually invest for profit in established companies
VC
Venture Capital
Similar to PE but usually invest in start-ups and take equity in the company itself rather than debt finance.
VDR
Virtual Data Room
Online data room for secure file sharing from the target organisation/vendor
TSA
Transition Service Agreement
An agreement to govern the provision of certain services by the Old Co to the New Co post Closing.
Closing
The date the deal closed
DD
Due Diligence
The Buyer’s exploration of the Seller’s company. Usually takes the form of Commercial, Financial, Legal, Technology but can include others like environmental, culture etc
EBITDA
Earnings Before Interest, Tax, Depreciation and Amortisation
Used to calculate Target value and purchase price
Adjusted EBITDA
Just EBITDA with adjustments
Used to calculate Target value and purchase price. Adjustments would typically take into account ‘one-offs’ such as external market shocks
Synergies
Business benefits as a result of two things combining
This is the holy grail of M&A – it is the reason people do deals.
Capturing Synergies
Making sure you achieve the synergies you planned for the deal
1+1 = 3
A party should only look to acquire if the acquisition generates more value than the two entities operating independently.
Target
An entity that a buyer has identified for purchase
SAPA (or SPA)
Sale and Purchase Agreement
The legal document that frames the deal and sets out each party’s obligations
Consideration
The amount paid
This is what the buyer gives the seller in return for the Target. It might not always be money and can be made up of other assets.
LOI
Letter of Intent
What the buyer signs and sends to the seller to show their interest in doing a deal
HOA
Heads of Agreement
A pre-deal framework agreement which sets out broad principals of the deal while confirming the details
