Glossary
TS & FDD glossary
The vocabulary of Transaction Services, one entry at a time.
B
Blind Profile / Teaser
An anonymised one- or two-page summary of a business for sale, distributed to potential buyers before they sign an NDA.
Bridge from EV to Equity Value
The waterfall of adjustments — primarily net debt and working capital — that converts Enterprise Value into the actual equity price paid at closing.
C
Capex vs Opex
The distinction between capital expenditure (long-term asset investment, capitalised on the balance sheet) and operating expenditure (period cost, expensed through the P&L).
Carve-Out
A transaction where a division or business unit is separated from its parent company and sold or listed as a standalone entity.
Cash Conversion Cycle
The time (in days) it takes a company to convert its investments in inventory and other resources into cash from sales.
Cash-Free Debt-Free
The standard basis on which M&A deals are priced: the Enterprise Value assumes the target is delivered with no cash and no debt at closing.
CIM (Confidential Information Memorandum)
A detailed sell-side document providing comprehensive information about the target company to potential buyers who have signed an NDA.
Commercial Due Diligence (CDD)
An independent assessment of the target's market position, competitive dynamics, and revenue sustainability, conducted alongside financial due diligence.
Completion Accounts
A post-closing price adjustment mechanism where the actual balance sheet at the completion date is compared against an agreed target to determine a price true-up.
Contingent Liabilities
Potential obligations that may arise depending on the outcome of uncertain future events, such as litigation, tax disputes, or environmental claims.
D
D&A (Depreciation & Amortisation)
The systematic allocation of the cost of tangible (depreciation) and intangible (amortisation) long-term assets over their useful lives.
Data Room
A secure (typically virtual) repository of documents about the target company, made available to potential buyers during due diligence.
Deferred Revenue
Cash received from customers before the associated service or product has been delivered — a liability on the balance sheet.
DIO (Days Inventory Outstanding)
The average number of days a company holds inventory before selling it — a measure of inventory efficiency and supply chain management.
DPO (Days Payable Outstanding)
The average number of days a company takes to pay its suppliers — a measure of how effectively payables are managed as a source of working capital funding.
DSO (Days Sales Outstanding)
The average number of days it takes a company to collect payment after a sale has been made — a key working capital metric.
E
Earn-Out
A deferred payment mechanism where part of the acquisition price is contingent on the target meeting agreed financial or operational milestones post-closing.
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation — the most cited profitability proxy in M&A.
Enterprise Value (EV)
The total value of a business, representing what a buyer pays for 100% of the company on a cash-free, debt-free basis.
Equity Value
The value of the shareholders' stake in a business, derived by subtracting net debt from enterprise value.
EV/EBITDA Multiple
The ratio of Enterprise Value to EBITDA, the primary valuation metric used to price businesses in M&A transactions.
Exclusivity
A period during which the seller agrees not to negotiate with other potential buyers, giving the preferred bidder time to complete due diligence and finalise documentation.
G
Good Leaver / Bad Leaver
Provisions in a management equity plan determining the price at which a departing manager's shares are bought back, depending on the reason for departure.
Goodwill
The intangible asset recorded on a buyer's balance sheet when the acquisition price exceeds the fair value of the net identifiable assets of the acquired entity.
I
IFRS 16 Impact
The effect of the IFRS 16 lease accounting standard, which requires operating leases to be capitalised on the balance sheet as right-of-use assets and lease liabilities.
Intangible Assets
Non-physical long-term assets including brands, customer relationships, technology, patents, and licences, recognised on the balance sheet.
IRR (Internal Rate of Return)
The annualised return on an investment, expressed as the discount rate that makes the net present value of all cash flows equal to zero.
L
LBO (Leveraged Buyout)
An acquisition financed primarily with debt, where the target's cash flows service the leverage and equity returns are amplified.
Locked Box Mechanism
A deal structure where the price is fixed at signing based on a historical balance sheet date, with no post-closing price adjustment.
LOI (Letter of Intent)
A non-binding document outlining the key terms of a proposed transaction, submitted by a potential buyer before entering exclusivity.
M
Maintenance Capex vs Growth Capex
The split of capital expenditure between spending required to maintain existing capacity (maintenance) and spending to expand the business (growth).
Management Accounts
Internally prepared, unaudited financial statements produced monthly or quarterly for management's operational decision-making.
Management Presentation
A formal presentation by the target's management team to potential buyers, providing an overview of the business, strategy, and financial performance.
MBI (Management Buy-In)
An acquisition where an external management team buys into a company, replacing or supplementing existing management.
MBO (Management Buyout)
A transaction in which the existing management team acquires the company, typically with backing from a private equity sponsor.
Mezzanine Debt
A hybrid financing instrument ranking between senior debt and equity, typically carrying a higher interest rate and often including equity warrants.
MOIC (Multiple on Invested Capital)
The ratio of total proceeds from an investment to the total capital invested, without adjusting for time.
N
NDA (Non-Disclosure Agreement)
A confidentiality agreement signed by potential buyers before receiving sensitive information about a target company in a sale process.
Net Debt
The gap between Enterprise Value and Equity Value in a deal — gross debt minus cash, plus a long list of debt-like items.
Net Working Capital
The normalised level of working capital a target business needs to operate — a direct lever on the purchase price.
Normalized EBITDA
EBITDA restated to remove one-off items and reflect a sustainable, run-rate level of profitability.
NWC Peg / NWC Target
The normalised level of net working capital expected to be in the business at closing, used as the reference point for any completion accounts adjustment.
P
PIK (Payment in Kind)
A debt instrument where interest is not paid in cash but instead added to the principal balance, preserving cash flow for the borrower.
Preference Shares
Shares that rank ahead of ordinary shares for dividends and/or proceeds in a liquidation or exit, often used in PE structures to return capital to the fund before management.
Pro Forma Adjustment
A restatement of historical financials to reflect a specific event — such as an acquisition or disposal — as if it had occurred at the start of the period.
Process Letter
A document issued by the seller's M&A adviser describing the sale process rules, bid deadlines, and required format for offers.
R
S
Senior Debt
The highest-ranking debt in a capital structure, with priority claim on assets and cash flows, typically provided by banks or institutional lenders.
Separation Costs
One-time costs incurred to separate a carved-out business from its parent, including IT system separation, legal restructuring, and third-party service contracts.
SPA (Share Purchase Agreement)
The definitive legal agreement governing the sale and purchase of shares in a company, including price, conditions precedent, representations, warranties, and indemnities.
Stranded Costs
Costs that remain at the parent company after a carve-out but which were previously allocated to the divested business, creating a cost gap.
W
W&I Insurance (Warranty & Indemnity)
An insurance policy that covers losses arising from breaches of seller representations and warranties in the Share Purchase Agreement.
Waterfall
The contractual order in which proceeds from a sale or liquidation are distributed among debt holders, preference shareholders, and equity holders.