Reference

M&A Glossary: Terms for Company Sales and Succession

A concise overview of the terms that most often come up in company sales and succession — objective, without marketing.

Asset Deal: Purchase of a company’s individual assets rather than its shares.
Bidding Process: A structured process in which several parties submit offers in parallel.
Business Succession: The transfer of a business to a successor — within the family, internally or externally.
Capitalised Earnings Method: Valuation based on future earnings discounted to present value.
Carve-out: The sale of a defined business unit out of a larger company.
Discounted Cash Flow (DCF): Valuation via discounted future cash flows.
Due Diligence: The buyer’s careful review of a company before purchase (finance, legal, tax).
Earn-out: A portion of the price tied to future performance, paid after closing.
EBITDA: Earnings before interest, taxes, depreciation and amortisation; a common valuation basis.
EBITDA Multiple: The multiple applied to EBITDA to estimate enterprise value.
Enterprise Value: The total value of the business, independent of financing.
Financial Investor (Private Equity): An investor who buys companies for return and later resells.
Goodwill: Value beyond tangible assets — brand, customers, earning power.
Information Memorandum (IM): Confidential, detailed sale document that prospective buyers receive only after the teaser and the NDA; the basis for indicative offers.
Letter of Intent (LOI): A usually non-binding declaration of intent setting out the key terms of a planned purchase.
M&A (Mergers & Acquisitions): Umbrella term for mergers, company acquisitions and the advisory around them.
Management Buy-in (MBI): An external manager buys into the company.
Management Buy-out (MBO): The existing management buys the company.
Mezzanine Capital: Not a legal term but a collective name for subordinated capital sitting between equity and debt.
Minority Shareholding: A stake of under 50 percent — capital, but not the majority of the votes.
Multiples Method: Valuation using market multiples of comparable companies.
Net Debt: Interest-bearing debt minus cash; bridges enterprise value to equity value.
Non-Disclosure Agreement (NDA): An agreement securing confidentiality before sensitive information is shared.
Sale via a Holding Company: Sale of shares through an intermediate holding company rather than directly from private assets; the tax effect depends on the country (Germany: section 8b KStG).
Sell-Side / Buy-Side: Advisory on the seller’s side (sell-side) or buyer’s side (buy-side).
Share Deal: Purchase of the company’s shares; the legal entity remains.
Share Purchase Agreement (SPA): The contract governing the sale of the company’s shares.
Signing / Closing: Signing is the signature of the contract, closing the completion and payment.
Silent Partnership: A capital investment by way of a contribution that passes into the owner’s assets; only the owner acts externally, while the silent partner shares in the profit (Austria: sections 179 et seq. UGB).
Strategic Buyer: An industry buyer who leverages synergies and often pays higher prices.
Teaser: An anonymous short profile that raises interest without revealing the company.
Vendor Due Diligence: A review of the company commissioned by the seller in advance.
Vendor Loan (Verkäuferdarlehen): A deferred part of the price the seller lends, repaid by the buyer with interest.
Working Capital: Capital tied up in day-to-day operations; often a point of negotiation.