Rating agencies classify the creditworthiness of debtors according to predefined rating procedures (rating). An AAA rating is given to a bond whose risk of default does not actually exist.
Abbreviation for "Asset Backed Securities". Bonds or debentures that are secured by assets, mostly receivables.
The term "Accession" refers to the accession to a loan agreement on the part of the company that originally took out the loan. In this case, the buyer of the company takes out a loan to finance the purchase price, which is secured by assets of the acquired company. An accession is therefore often found in connection with the financing of company acquisitions (acquisition finance).
Documentation of the accession to a credit agreement (Accession).
An account is a common name for the combination of mutual receivables and payables of two parties.
Pledge of an account.
Accounting is the term used to describe the bookkeeping of a company. If a transaction is called "purely accounting-relevant" in negotiations, this means that the transaction has an impact on the balance sheet, but not on liquidity.
Accruals are sums of money that an entity sets aside for expected future expenses. They therefore correspond to provisions for future expenses. For this reason, there is a conceptual overlap with the terms provisions and reserves.
Acquisition of a company or part of a company. See also Share Deal and Asset Deal.
Acquisition finance refers to the capital that a company uses to buy another company. The purchase is often financed by taking out loans. Due to its leverage effect, acquisition finance enables company buyers to achieve a higher return on their invested capital.
Group of companies to be acquired.
An Acquisition Investigation is an alternative name for the term Due Diligence (see also Due Diligence).
Analysis of a company acquisition project (takes place within the framework of due diligence).
An added value describes the increase in value of a company through an investment/total takeover.
As soon as further companies or holdings are acquired following a transaction that has already been carried out, this is an add-on transaction.
Adjusted present value approach
The Adjusted Present Value (APV for short) is a methodical approach to company valuation using the Discounted Cash Flow (DCF) valuation procedure. The value of a company's equity is determined by deducting net financial liabilities from the total value of the company (the entity value).
Abbreviation for "American Depositary Receipts" and "Alternative Dispute Resolution".
An advisory board is the advisory council of a company. It can be designed as a controlling or purely advisory body.
In principal-agent theory, the agent is a person who acts for another person, the principal. A common manifestation is the agent as a sales agent, such as a sales representative.
The premium is the difference between the nominal value of the share and the price paid for it by the transferee.
Acquisition of a company or part of a company. See also Share Deal and Asset Deal.
The term alignment originally comes from biology and in the M&A business refers to the adjustment of behavioral patterns of employees of merger candidates.
Alternative Dispute Resolution
Alternative Dispute Resolution (ADR) is a collective term for alternative dispute resolution procedures. Mediation is the best known ADR procedure. In company purchase contracts, a staged ADR procedure is often agreed upon, according to which a dispute resolution procedure must first be passed through before (arbitration) courts can be called upon.
American Depository Receipts
American Depository Receipts (ADRs) are depository receipts issued by a US bank that allow US investors to invest easily in foreign stocks.
Amortization is a special form of balance sheet depreciation. Here, amortization is applied to intangible assets, especially goodwill. Depreciation on tangible assets (see also Depreciation) must be distinguished from this.
Ancillary agreement to a main contract, such as a company purchase agreement.
An angel investor (also known as a "business angel") is a wealthy private individual who invests parts of his own assets in newly founded companies (start-ups). Due to his own professional activities, an angel investor often has a high level of professional expertise and a large network. The start-up can profit from this in addition to the pure financial performance. However, an angel investor must be distinguished from a venture capitalist.
The annex to a treaty or report is called an annex. Synonyms are Attachment, Enclosure and Exhibit.
British English term for the annual financial statements of a company.
Annual financial statement
US American English term for the annual financial statements of a company.
An anti-dilution clause in participation agreements is intended to protect shareholders from the percentage and value dilution of their shareholding in later financing rounds.
The APV or Adjusted Present Value is a methodical approach to company valuation using the Discounted Cash Flow (DCF) valuation procedure. The value of a company's equity is determined by deducting net financial liabilities from the total value of the company (the entity value).
Arbitration refers to an arbitration procedure that is used in conflicts such as litigation and is decided by non-state courts.
An arbitration clause is the English term for an arbitration clause. The contracting parties sign an agreement in which it is stipulated that all disputes that may arise in connection with the contract are to be decided in a binding manner by an arbitration court.
An arrangement fee is a commission or fee that a bank (arranger) receives for arranging the syndication, structuring and documentation of a loan under a syndicated loan. It must be paid by the borrower before the loan is paid out.
An arranger is the bank that assumes the structuring and resale of parts of the loan (syndication) in the case of syndicated loans.
An asset describes an asset. In the M&A context, an asset is any object of a transaction, regardless of whether it is carried out as an asset deal or a share deal.
Asset Backed Securities
Asset-backed securities (ABS) are asset-backed securities that are used to secure payment claims against a special purpose entity. The special purpose entity acquires the receivables and securitizes them as securities.
In an ABS (asset backed securities) transaction, the receivables sold can be assigned to different categories, for example trade receivables. Based on this categorisation, typical legal and economic issues can be identified and standard solutions developed for them.
In an asset deal, certain assets are defined, listed and assigned a respective value. The individual assets, which also include liabilities (including intangible assets such as customer relationships), can then be acquired by a buyer. The asset deal can thus be distinguished from a share deal, in which the shares are acquired.
Asset finance is a generic term for forms of financing in which the legal and economic ownership of the object to be financed is not held by the company but by the investor. Leasing is a classic example.
Asset stripping means that a company is broken up by the sale of individual company shares or individual assets.
The assignee is the new creditor of a claim assigned by the assignor, in factoring the factor is usually the assignee.
An assignment loan is a short-term cash loan secured by the assignment of outstanding receivables of a company. As a rule, banks only lend on domestic receivables and only in a lump sum of 30 to 60 percent of the assigned total receivables. Factoring is therefore more interesting from a business management point of view for many companies.
The attachment to a contract or report is called an attachment. Synonyms are Annex, Enclosure and Exhibit.
An auction is the sale of a company by means of a bidding process (see also Bidding Process).
An auction process refers to the procedure which the organizer (company seller or investment bank) has planned for the execution of the auction.
In an auction sale, a company or other assets are sold by means of a bidding process (auction).
An audit is the annual or other audit of a company, which is carried out by an independent auditor.
Committee of the supervisory body of a company responsible for matters relating to the statutory audit of the company (audit).
An auditor is an independent expert responsible for the audit (annual or other) of a company.
An Auditors Certificate is a document that summarizes the results of the auditor at the end of the audit.
Period during which a corporate loan can be drawn down.
A backstop facility or backup facility is a loan granted by a bank only when a borrower cannot otherwise meet his financing needs.
A bad leaver is a manager who is a shareholder and leaves the company due to his own misconduct or at his own request. The opposite is called a good leaver.
A banking consortium is a grouping of several credit institutions for the purpose of carrying out certain banking transactions. The coordination is usually carried out by a consortium leader.
Basel II is an international agreement that came into force on 1 January 2007. It regulates the minimum capital backing for loans granted by banks by making the capital requirements for banks dependent on the risk of the loans issued.
Basel III has further tightened the capital adequacy requirements compared to Basel II (see also Basel II). The aim is to improve banks' capital adequacy in order to prevent new financial crises.
Baselining is the process of creating a baseline for results, which is used as a basis for assessing the success of a corporate merger and for initiating appropriate measures.
A basis point or basis point is the specification of an interest rate. It corresponds to 1/100 of a percentage (0.01 percent).
A basket is the provision in a company purchase agreement according to which a buyer may only assert warranty claims if the total sum of all claims exceeds a defined threshold value.
A beauty contest refers to the solicitation of a company planning an initial public offering (IPO) by investment banks, law firms, transaction houses and other consultants with the aim of accompanying the IPO as consortium leader.
A benchmark or milestone refers to a particular point in the company's development at which certain measures are taken (e.g. new capital injection). Furthermore, the term "benchmarking" can also mean the comparison of important key figures with other industry participants.
The term Best Effort comes from Anglo-American contract practice and is unknown in German law. It refers to a contractual clause which stipulates that the contracting party concerned must make every effort (in a reasonable manner) to fulfil its contractual obligation (depending on the type of contract). Conversely, this means that the obligated contractual party does not owe a certain success of its performance.
Best Efforts Underwriting
Best Efforts Underwriting means that when a company goes public or issues bonds, a consortium of banks undertakes to make only the best efforts to place the bonds. This means that - unlike with hard underwriting - the syndicate does not provide a placement guarantee.
The seller describes in company purchase agreements that the company has certain characteristics to the best of his knowledge (best knowledge). It is therefore a limited warranty.
The beta or beta factor is an important element in the valuation of companies. It is based on an orientation towards the capital market and is intended to reflect the risk measure for the fluctuation margin of a share price in comparison to the market as a whole.
A bid is an offer to acquire a company. The offer can be binding (binding bid) or non-binding (indicative bid).
In a bid letter, the prospective buyer submits an initial purchase price offer (see also Bid) for the acquisition of a company. In most cases, a Bid Letter is not legally binding.
A bidding process is a structured bidding procedure initiated by an M&A consultancy or an investment bank to sell a company (see also Auction).
In a buy-in management buyout (BIMBO for short), internal managers acquire the company together with external managers.
In a bidding process (auction, bidding process), a binding bid (sometimes called a binding offer) is a binding bid for a company by a prospective buyer. However, a Binding Bid is usually only binding from a moral point of view, as the legal formal requirements are often still missing.
A binding offer (sometimes called a binding bid) is a binding offer made by a prospective buyer in a bidding process (auction, bidding process). As soon as the seller accepts the offer in due time and form, the contract is concluded.
BINGO is a short form for buy-in growth-opportunity. This is a management buy-in (MBI) in which a significant portion of the financing does not have to be spent on the purchase price, but is invested in the expansion of the acquired company.
A black-out period is the period during which banks accompanying a securities issue do not publish any information about the issuer beyond the content of the sales prospectus.
A blue chip is a designation for high-turnover shares of internationally known and important companies. The prices of such companies are often used in the calculation of the central stock exchange index (e.g. for the DAX).
A board is the abbreviation for the Board of Directors and designates a body or authority. (See Board of Directors for more detailed information)
Board of directors
The board of directors (often referred to as the board in its abbreviated form) is the highest administrative body of a company in the Anglo-Saxon legal system. The Board of Directors (in Germany divided between the executive board and the supervisory board) is elected by the shareholders and appoints the management, monitors its management and decides on fundamental issues.
Boiler Plate Clause
The Boiler Plate Clause is a standard clause in contracts that is routinely agreed upon and therefore usually not subject to negotiation.
A bond is a security, which is usually characterised by fixed interest payments).
The bookbuilding process determines the price at which a newly issued bond or share is first listed on the stock exchange.
In the course of a securities issue, the managing underwriter is referred to as the bookrunner, who maintains the electronic order book as part of the bookbuilding process.
A borrower is a person or a company that borrows money from a bank or some other kind of lender
A BOT is the short form for Build-Operate-Transfer and describes an operator model in international project management. Operator models are project forms within which the actual investor transfers the construction, operation and maintenance of a plant to another company for a limited period of time and thus acts as a customer to the operating company.
The bottom line is the lowest line of the Profit and Loss Statement (income statement). This line usually contains the net income (annual net profit or loss), i.e. it shows the profit or loss of the company.
The break-up fee refers to the pre-defined penalty payment to which a contracting party commits itself if it unilaterally breaks off the contract negotiations or if the party is solely responsible for the failure to conclude the contract.
Breakage costs refer to the amount that a borrower must pay to the bank if he wishes to repay his loan before the agreed maturity date. A synonym for this is "broken funding costs".
Bridge financing or also bridge financing, interim financing or bridge financing, describes the short-term and temporary procurement of financial resources.
A bridge loan is the loan amount that is made available to a company as interim financing until the final financing is completed.
A bring-down means that previous contractual declarations are confirmed (possibly in an updated form). In the case of a company purchase, this means that the representations and warranties given by the seller in the purchase contract are still correct when the contract is closed.
The bring-down certificate is a certificate in which the management of the target company confirms that the representations and warranties given by the seller in the purchase contract are still correct when the contract is closed (see also bring-down and bring-down letter).
A bring-down letter is a letter in which the authors formally confirm that the content of the document prepared earlier, for example a due diligence report, is still factually correct (see also Bring-down and Bring-down Certificate). In the case of a company acquisition, the presentation of the bring-down letter is often related to warranty commitments.
Broken Funding Costs
Broken funding costs are the amount that a borrower must pay to the bank if he wishes to repay his loan before the agreed maturity date. A synonym for this is "Breakage Costs".
A Build-Operate-Transfer (short BOT) describes an operator model in international project management. Operator models are project forms within which the actual investor transfers the construction, operation and maintenance of a plant to another company for a limited period of time, thus acting as a customer to the operating company.
A bullet repayment is the English term for a bullet loan.
The burn rate describes the speed (for example, expressed in months) that a young company (start-up) needs to consume its equity and loans in a given period of time. Start-ups with a high burn rate take less time to use up their capital than start-ups with a low burn rate.
A business angel (also called angel investor) is a wealthy private individual who invests parts of his own assets in newly founded companies (start-ups). Due to his own professional activities, a business angel often has a high level of professional expertise and a large network. The start-up can profit from this in addition to the pure financial contribution. However, a business angel must be distinguished from a venture capitalist.
One speaks of a business cooperation if two or more companies cooperate voluntarily but remain legally independent. Companies enter into a business cooperation in order to generate synergies and increase their market share.
Business Judgment Rule
The Business Judgment Rule is a provision of Anglo-American law according to which the board of directors of a stock corporation is entitled to extensive discretion within the framework of the management of the company. This content of the rule corresponds to German jurisdictional practice and was codified in § 93 (1) sentence 2 of the German Stock Corporation Act (AktG). According to this provision, members of the Management Board have room for manoeuvre when making business decisions. If it can be assumed that a member of the Management Board acted in the best interests of the Company when making a business decision based on appropriate information, no breach of duty on the part of the Management Board can be assumed.
A business plan is a document that summarizes the goals, strategies and essential characteristics of a company. In many cases, it is one of the first documents sent to potentially interested investors by companies seeking capital.
A business unit (also called strategic business unit or BU for short) is the strategic business unit as an element in the portfolio of a company.
A buy and build is the strategy of a private equity or venture capital fund to acquire further investments from the same industry on the basis of a company acquired as a platform and to merge them into a larger group of companies and to exploit synergies.
Buy-In Management Buyout
In a buy-in management buyout (also known as a BIMBO), internal managers acquire the company together with external managers who join the company.
A buy-out is the takeover of a company by the existing management or an external management (see also Management Buy-in or Management Buy-out).
The buy-side is the buyer's side in a company purchase or the purchaser of securities in a capital market transaction.
BWA (business assessment)
A business assessment (BWA for short) is an actual determination of business management key figures.
Call or call option
A call or call option is the right (but not the obligation) to acquire shares in a company within a period of time or at a time at an agreed exercise price. The counterpart of a call option is the put option (see therefore also Put Option).
A cap is the maximum amount for which the seller is liable to the buyer for warranty claims. In practice, it is often between 25 and 50% of the purchase price. Furthermore, the cap also refers to interest limitation clauses for loans with variable interest rates. The interest rate can be limited upwards (cap) or downwards (floor).
CAPEX is the abbreviation for Capital Expenditure. This is capital expenditure by an enterprise for longer-term fixed assets (for example, new machines, new factory buildings).
Capital distribution refers to the corporate assets which are paid out to the shareholders without being the distribution of the net income for the year or retained earnings. The payment is therefore made from the substance of the company. In practice, it is common practice that the seller undertakes in company purchase agreements not to make such distributions in the period between signing and closing.
Capital employed is the investment capital used by the company. It is calculated as the sum of fixed assets and current assets less current liabilities.
Captial Expenditures (CAPEX) are expenditures for investments in fixed assets. In the context of company valuation, free cash flow is determined by deducting capital expenditures from cash flow.
The capital gain arises from the sale of company investments or other assets. It refers to the capital gain less acquisition costs or book value and disposal costs.
Capital Lease is the English term for finance lease. The lessor leases the leased asset to the lessee for its entire life.
The term capital stock refers to the nominal capital or the share capital of a company. The capital stock is shown on the liabilities side of the balance sheet. Here it is important to differentiate between equity and capital stock. In addition to the nominal capital, the equity capital also includes revenue reserves and premiums.
Capital under Management
Capital under management is the amount of capital available to a private equity fund for investment purposes.
Captive is the short form of captive company and describes a company that belongs to a group of companies but actually performs tasks outside the group. An insurance company belonging to a group would thus be an example of a captive.
A captive company (also known as a captive in the short form) is a company that belongs to a group of companies but actually performs tasks outside the group. A captive insurance company would therefore be an example of a captive.
A captive fund is a venture capital or private equity fund that belongs to a group of companies and predominantly invests money from that group.
Captive insurance company
A captive insurance company is an insurance company that does not belong to an insurance group and has the task of insuring risks of the group.
Carried interest is the remuneration that managers of a venture capital or private equity fund receive in return for making a profit on the assets managed by the fund. The carried interest is their share of this profit.
Carve-out means "to carve out" and refers to the spin-off of a company share to form a legally independent unit. The parent company usually remains the sole shareholder of the carved-out business unit for the time being. There are similarities to a spin-off, whereby the spun-off part of the company is not made into an independent company, but is sold. Furthermore, a carve-out is often also seen as preparation for a sale or an IPO.
Case scenarios is the English term for case studies that are carried out, for example, to examine potential involvement. Three types of cases are often considered: A pessimistic case scenario for a negative development, an optimistic case scenario for a positive development and a most-likely scenario for the most probable development.
The liquid assets of a company are called cash.
Cash flow is a key indicator for the valuation of companies. It is calculated from the net income for the year or retained earnings and enables statements to be made about the liquidity and earning power of a company.
Cash flow deals
In cash flow deals, the acquirer finances the purchase price through future cash flows.
Cash Free - Debt Free
Cash Free/Debt Free is an indication of the purchase price that would be paid if the company had neither cash nor financial debt (Enterprise Value).
The distribution of profits in a private equity fund is regulated by a catch-up provision.
CDO is an abbreviation for Collateralized Debt Obligation (see therefore also Collateralized Debt Obligation).
Central Settlement Agent
Central settlement means that the invoices of many suppliers, for example to the members of a purchasing cooperation, are recorded, processed and settled by a central office. Since the members also assign their corresponding receivables to the central payer, one of the things to ensure in factoring is that the priority principle is observed.
The CEO is an abbreviation for Chief Executive Officer.
Certain funds represent a bank's commitment to provide the funds specified in the loan agreement for a certain period of time. The Certain Funds commitment gives the seller of the company the certainty that payment of the purchase price is secured.
Certificate of Good Standing
The Certificate of Good Standing confirms that a company has been effectively established and is currently in existence without insolvency or liquidation proceedings being pending.
The CFO is an abbreviation for Chief Financial Officer. This job title describes a person who holds a management position in finance.
The behaviour of the employees of merging companies is brought together in the context of change management.
Change of control
The change in control of a company is called a change of control.
Change of Control Clause
The Change of Control Clause is a contractual clause that regulates the rights of the parties in the event of a change of control of one party. The party is often granted a right of termination in this case.
Chief Executive Officer
The Chief Executive Officer (CEO for short) is the highest-ranking manager in Anglo-Saxon companies. The position of a Chief Executive Officer is comparable to the managing director of a GmbH or the chairman of the board of an AG.
Chief Financial Officer
The Chief Financial Officer (CFO) is the highest-ranking manager responsible for finance in the Anglo-Saxon world.
Chief operating officer
The Chief Operating Officer (COO for short) is the manager who runs the operational business in Anglo-Saxon companies. In practice, in many companies the Chief Financial Officer assumes the function of Chief Operating Officer.
Strict information barriers must be put in place to avoid conflicts of interest within a financial institution. These information barriers can also be called Chinese Wall. Employees in the respective departments, which are separated by a Chinese Wall, are not allowed to exchange any information.
Choice of Forum Clause
The Choice of Forum Clause is the agreement of the contracting parties as to the court before which any disputes are to be settled.
Choice of Law Clause
The Choice of Law Clause is the agreement that governs which law is to be applied to international contracts.
Classes are the various classes into which shares can be divided. Examples of such classes are ordinary or preference shares.
A clawback clause regulates the distribution of profits in a private equity fund or investment fund. This clause stipulates that the profit achieved is fully attributable to the investors (limited partners) as soon as a contractually agreed maximum profit has been distributed to the fund initiators. The investors' financial risk can thus be reduced.
Clearing refers to the offsetting of receivables and payables with the aim that only the net balances calculated in this way are cleared.
In the M&A practice, closing is the execution of a company purchase agreement. The closing usually takes place in the form of a physical or telephone meeting of the contracting parties, during which the closing actions are carried out.
Closing actions relate to measures and actions taken in the course of the execution of a company purchase agreement. The payment of the purchase price or the resignation of the managing director are examples of closing actions.
Closing conditions are the agreed conditions that must be present for the execution of the contract (closing). The most important Closing Condition is the existence of the anti-trust clearance (Merger Clearance).
The closing date is the day on which the closing takes place (see also Closing).
Closing Deliveries are documents that were exchanged between the contracting parties during the closing.
A club deal is a term used to describe all those investments that are planned and made jointly by several financial investors.
The bank that structures a credit exposure together with other banks is called a co-arranger.
A subsequent investment in a company by additional investors is called co-investment.
A co-lead manager is a lending bank that is at the head of a loan syndicate alongside the lead bank.
A co-sale right is another term for a tag-along right and refers to the right of co-sale (for example, by a minority owner) on the same terms as a majority owner sells his shares.
COB Rules is an abbreviation for Conduct of Business Rules. These are my obligations of good conduct that financial service providers and credit institutions must fulfil towards their customers.
Collateral is a collective term for loan collateral.
Collateralized debt obligation
When we speak of collateralized debt obligations, we are referring to securities that are secured by a pool of different types of receivables.
Collateralized loan obligation
A collateralized loan obligation is a security secured by a pool of corporate loans.
A comfort letter is a declaration by a parent company in which it promises to help its subsidiary in case of financial difficulties.
A commitment facility is the obligation of a bank to make the credit (facility) available in the agreed amount.
A commitment fee is a commitment fee for loans that have been made available but not yet drawn down.
A Commitment Letter is a formal offer by a bank to provide a loan on the terms and conditions specified in the Commitment Letter.
Common Stock is an English term for ordinary shares.
In M&A practice, a company buy-back is the repurchase of own shares by a company from a financial investor.
Completion is a British synonym for closing in company acquisitions.
Compliance is a collective term for the observance of rules of conduct, guidelines and laws in a company.
The Compliance Certificate is a confirmation by the borrower to the bank that he/she has complied with the obligations (covenant) agreed in the loan agreement.
The condition precedent in a contract is referred to as the condition precedent. For example, the closing is the condition precedent for the transfer of company shares in a company purchase agreement.
Conduct of Business Rules
The Conduct of Business Rules (COB Rules for short) are the duties of good conduct that credit institutions and financial service providers must fulfil vis-à-vis their customers.
The Confidential Undertaking constitutes the unilateral obligation of a party to keep confidential any information received from the other party.
A Confidentiality Agreement is the obligation of the parties to keep confidential information received from the other party.
Confirmatory Due Diligence
A Confirmatory Due Diligence is the downstream due diligence of a company buyer. This is the last phase of the due diligence process and takes place, for example, after the closing.
The version of a document confirmed as binding is called Conformed Copy.
Consolidated Financial Statements
The financial statements of a company that consolidates all the financial statements of all its subsidiaries and sub-subsidiaries are called consolidated financial statements.
A Consortium is an association of several companies to carry out a task (for example, an investment project) jointly. The cooperation ends after the project has been realized.
If several lenders grant a loan, they must agree on the ranking of their claims. Contractual subordination is the agreement that regulates this matter.
Contractual Trust Agreement
A contractual trust agreement is the legal structure for outsourcing pension obligations from a company for accounting purposes, while at the same time improving the insolvency resistance of pension claims.
COO is the abbreviation for Chief Operating Officer. A COO manages the operational business.
Corporate finance is a special field of finance and is offered in particular by banks and financial institutions as a service for companies. This includes in particular advice on project financing, the evaluation of investment decisions and the value of the company as well as the financing of mergers and acquisitions. Other topics include, for example, advice on the optimal capital structure and dividend policy.
Corporate governance refers to the legal and institutional framework that influences the management decisions of a company and thus its success.
A corporate raider (or corporate looter) is an investor who wants to take over the target company against the will of its management or wants to impose its business strategy on the management. The goal of a corporate raider is often the short-term maximization of profits.
Corporate venture capital
Corporate venture capital is the provision of risk capital for young companies by the venture capital departments of large corporations. With their investment in start-ups, the groups often pursue strategic and not only financial goals and thus differ from independent venture capital companies.
In the Anglo-Saxon world, the corporation is a term for a corporation.
In a cost coverage arrangement, one party to a transaction gives the other party to the transaction a commitment to reimburse all or part of the costs of a transaction.
A covenant is a contractual obligation to do something or not to do something. In a company acquisition agreement, for example, covenants are the obligations that must be fulfilled by the contracting parties before the agreement is signed and closed. This concerns, for example, the obligation of the seller to continue the business operations of the target company as before until the closing.
Credit enhancement refers to a mechanism by which the credit quality of a loan receivable or bond can be improved for rating purposes.
A credit facility is a credit line or loan made available.
A creeping takeover is a successive purchase of securities on the stock exchange until a certain investment threshold is reached.
Cross default is a termination clause that gives the lending bank a right of termination if a reason for termination arises under another contract or if the other contract is terminated.
The Cross-border Merger is an English term for a cross-border merger of companies.
CTA is the abbreviation for Contractual Trust Arrangement (see therefore Contractual Trust Arrangement).
Cultural Due Diligence
In a Cultural Due Diligence, the cultural compatibility on the part of the company buyer and the company seller is examined during the preparation of M&A.
Current Assests is the English name for current assets. Current assets include inventories, advance payments, marketable securities, receivables and cash and cash equivalents.
Current Liabilities is the English term for the current liabilities of a company.
The current ratio is the ratio of assets that can be liquidated in the short term to the short-term receivables of a company. The higher this ratio is, the better the company is able to repay short-term liabilities.
In the context of a company audit (due diligence), the data room serves to enable the potential buyer to check the target company's company information. A distinction can be made between a physical data room and an electronic data room.
Data room index
The data room index is a directory that records all documents in the data room.
The DCF method is the abbreviation for the Discounted Cash-Flow method, which is a widely used method of assessing the value of an enterprise (see also Discounted Cash-Flow).
Deal Design is a summarizing term for the way a sales contract is designed. It regulates, for example, whether there is a one-off payment or an earn-out and whether it is an asset deal or a share deal.
A de minimis rule prevents the assertion of relatively low-value claims by agreeing a lower value limit in company purchase contracts, below which a contracting party may not assert any claims under the contract.
The term debenture is the English term for a bond for medium and long-term financing.
The term debt includes all liabilities of a company or person. This includes both financial debt and current liabilities, which are part of net working capital.
Debt capacity is the ability of a target company to bear the debt caused by debt financing in the case of a leveraged buy-out. The corresponding ratio used to measure debt capacity is debt-to-EBITDA.
Debt Free means that a company is free of interest-bearing liabilities.
Debt financed takeover
Debt financed takeovers, or LBOs (Leveraged Buyout), are carried out with the help of debt capital, which may come from bank loans or from bonds issued specifically for this purpose. In practice, there are different types of leveraged buyouts, such as a management buyout (MBO), in which the company is bought by the management, a management buy-in (MBI), in which an external management acquires the target company, an employee buyout (EBO), in which the workforce buys its company, an owner buyout (OBO), in which the co-shareholders acquire the entire company, or an institutional buyout (IBO), in which an investee company acquires the target.
As soon as a purchase agreement has been executed, the company buyer often shifts the loans taken out to finance the purchase price to the acquired company. This is known as debt pushdown and has the advantage that the interest expenses incurred for the loans can be offset against the profits of the acquired company in a tax-reducing manner.
Debt-to-EBITDA is a ratio of a company's debt capital to EBITDA.
In a debt-to-equity swap, a loan claim is exchanged for equity in the debtor company.
Deductible is the name given to the allowance that is deducted from the warranty claims of the company buyer in order to prevent the buyer from looking for the slightest warranty issue.
Deemed knowledge is the knowledge of a person that he or she should have with the help of a certain degree of care. In the context of company acquisitions, it is often a point of dispute whether a warranty-based knowledge of the seller is only present if the seller actually has knowledge or also if deemed knowledge is present.
A default is a situation that constitutes a breach of contract. An event of default is triggered by the addition of further contractually agreed circumstances, such as the fruitless expiry of a deadline.
A default margin is an agreed, increased interest margin (margin), which is applied instead of the agreed interest margin if a default occurs (see also Default).
A defeasance is a method by which a company can reduce its liabilities. In this case, a third party takes over the liabilities in return for a payment in the amount of the discounted repayment amount.
Deferred compensation is used in cases of deferred consideration, e.g. if part of a purchase price is paid only after a certain period of time has elapsed following performance of the contract (deferred purchase price).
Deferred purchase price
A Deffered Purchase Price is that part of the purchase price that the buyer does not have to pay immediately upon closing but only at a later date.
A delisting exists if a listed share withdraws from official or regulated stock exchange trading.
Depreciation refers to the depreciation of tangible assets.
A dilution (or also dilution) is the reduction of a shareholder's percentage share in a company. A typical case where a dilution occurs is when a shareholder does not subscribe to new shares in a capital increase.
Direct public offering
In a direct public offering, the issuer sells its securities directly to investors without the intervention of a bank.
The term Director is particularly common in Anglo-American parlance and refers to a member of the highest performance and supervisory body of a company.
A disclaimer is an exclusion clause or also a disclaimer.
Disclosure is the disclosure of information in the context of annual financial statements or a company acquisition.
The term Disclosure Exhibits refers to the annexes to the company purchase agreement in which information on the company is disclosed. An alternative term is Disclosure Schedules.
In a disclosure letter, the seller of the company discloses information about the company to the buyer. A Disclosure Letter is used to exclude the disclosed information from warranty claims.
The term Disclosure Schedules covers the annexes to the company purchase agreement in which information about the company is disclosed. An alternative term is Disclosure Exhibits.
Discounted Cash Flow
The discounted cash flow is a term for the expected future surplus income of a company, which is discounted to the valuation date.
Discounted Cash Flow method
A discounted cash flow method is used to calculate the value of a company. For this purpose, expected future cash flow surpluses of a company are discounted to a valuation date. Within the discounted cash flow method, a distinction can be made between the gross (entity) approach, the adjusted present value approach and the net (equity) approach.
Non-performing loans are also known as distressed debt.
The term divestiture refers to the sale of a subsidiary or part of a company.
A dormant company is a company without active business activities.
When a parent company merges with its subsidiary, this process is called a downstream merger. The counterpart of a downstream merger is an upstream merger.
DPO is the abbreviation for Direct Public Offering. In a DPO, the issuer sells its securities directly to investors without the intervention of a bank.
A Drag-Along right means that a shareholder willing to sell has the right to force a co-shareholder to sell his shares. The sale is made on the same conditions to the same prospective buyer. A Drag-Along right usually does not exist by law or statute, but is based on a contract. The buyer is thus enabled to take over the entire shares or at least a controlling majority.
Drawdown of a loan under a credit agreement.
A drawdown period is the time frame in which a borrower can draw down the loan granted.
As soon as the shares of a company are listed on at least two stock exchanges, this is called dual listing.
One speaks of a dual track when the seller of a company examines in parallel in the context of a company sale whether the sale via the stock exchange in the context of an initial public offering (Initial Public Offering) or the sale to a single investor is more worthwhile and only at the last moment decides on the option that is more attractive for him.
Due diligence is the investigation and valuation of a company. A distinction is made between different types of due diligence. Examples include general, economic, financial, legal, tax and environmental due diligence.
Due Diligence Report
In a due diligence report, the results that the respective consultants have obtained in the course of the environmental, tax, legal, financial, economic and general due diligence are summarised in writing.
In the context of early-stage financing, a start-up that is in the first phase of its development receives financing (usually through a business angel or a venture capital company specialising in early phases)
When agreeing on earn-outs, a company purchase agreement is structured in such a way that part of the purchase price depends on the future development of the target company. The reference figure for the earn-out is often the sales, EBITDA or EBIT achieved in a certain period.
EBIT, also known as operating profit, is a key performance indicator in the financial sector and is the abbreviation of Earnigs Before Interest and Taxes. In contrast to EBITDA, depreciation and amortisation are already deducted when calculating EBIT.
EBITDA is the abbreviation for Earnings Before Interest, Taxes, Depreciation and Amortization and is a key performance indicator in the financial industry. In contrast to EBIT, EBITDA does not take depreciation and amortization into account, which means that EBITDA primarily reflects a company's cash-effective results. Consequently, EBITDA is independent of national accounting laws.
EBT is the abbreviation for Earnings before Taxes and describes the pre-tax profit. In contrast to EBIT, interest payments have already been deducted in EBT.
The Effective Date is the date on which the transfer of a company or part of a company is to become economically effective.
The annex to a contract or report is called an exposure. Alternative names are Annex, Attachment and Exhibit.
Enterprise value is calculated using the discounted cash flow method and refers to the value of a company before deduction of financial liabilities (financial debt) and before addition of cash (cash). If financial debt is deducted and cash is added, the equity value is obtained.
The Entity-approach is a methodical approach to company valuation using the discounted cash flow procedure. Under this approach, the enterprise value is first determined on the basis of the total forecast free cash flows. This is done by discounting the free cash flows using a mixed interest rate of the cost of equity and the cost of debt (weighted average cost of capital). The present value of the financial debt is deducted from the enterprise value calculated to obtain the equity value.
Environmental due diligence
In the context of the company audit prior to a company acquisition (due diligence), environmental due diligence refers to the examination of the environmental legal situation of the target company.
Environmental indemnity means that the seller of a company indemnifies the buyer and the acquired company from identified environmental risks under the company purchase agreement.
The equity capital of a company is called equity.
The equity commitment describes the obligation of a financial investor to provide the special purpose vehicle (SPV) acting as the buyer of a company with equity.
If the purchase price of a company is financed with the equity of the buyer, this is called equity financing.
An equity kicker is a contractual arrangement in which the lender is granted a claim to a share in the equity of the financed company in addition to interest claims. This gives the lender the opportunity to acquire shares in the target company to be financed at special conditions.
An equity sponsor is an alternative term for an equity investor. This is usually a financial investor.
Equity value is a term for the value of the equity capital invested in a company.
Escrow (also known as trust) is the use of part of the purchase price as security for possible claims of the Buyer under the company purchase agreement (Escrow Amount), for example due to breaches of warranty. This part of the purchase price is deposited in a separate bank account (Escrow Account) or administered by an Escrow Agent until payment to the Seller.
The Escrow Account is the bank account where the Escrow Amount is deposited (see also Escrow).
An escrow agent is a trustee (for example a lawyer or notary public) who manages the escrow account (see also Escrow).
The Escrow Agreement is the agreement between the parties to a company purchase contract on how the Escrow Agent is to manage the Escrow Amount (see also Escrow).
The amount of money that serves as security for the claims of a contracting party in an Escrow (see Escrow) is called Escrow Amount.
Event of Default
The German term for an Event of Default is "Kündigungsfall". The creditor of a loan is entitled to terminate the loan agreement and demand repayment of the loan amount. What exactly is an event of default (for example, insolvency or late payment) is regulated individually in the loan agreement.
An Evergreen Fund is a venture capital or private equity fund without a fixed term.
Exclusivity describes the commitment of one party to the contract, such as the seller of the company, to conduct negotiations only with the other party. The exclusivity commitment is particularly common in the final phase of a company sale.
The execution copy is the final version of a contract, which is signed at signing.
The annex to a contract or report is called an Exhibit. Alternative names are Annex, Attachment and Enclosure.
The exit is the term used to describe the exit of an investor from his investment. The exit can take place in several ways. Possible options include selling the investment to another financial investor (secondary buy-out), going public (initial public offering), selling it back to the original seller (company buy-back) or selling it to a strategic investor (strategic investor).
A facility agent is a bank that assumes the administration of a syndicated loan against payment of a commission (agency fee).
A fact book can also be called an exposé in German. It contains the description of a company, which serves to inform potential investors, e.g. before M&A processes. A Fact Book can contain general and specific company information, market analyses, financial figures and presentations of existing investment potential.
Factoring refers to the sale of receivables to a financing institution (factor).
Fair disclosure describes the way in which a circumstance must be disclosed to the buyer. This includes, for example, that the documents are correctly named and correctly classified in the course of due diligence.
If an investment bank takes a position on the question of whether the price of a company or part of a company in the context of a merger is justified from its point of view, this is called a fairness opinion.
A feasibility study serves to investigate the prospects of success of a measure.
The Fee Letter is a term for the agreement of two or more parties on what fees are paid for which services.
Final Bid / Final Offer
The term Final Bid can be described in English as the "last or final bid". In particular in the bidding process (auction process), bidders submit an offer for the next round of negotiations. On this basis, the seller decides with which bidders (or which bidder) the negotiations will be continued. Although the term suggests it, a final bid is usually not designed as a legally binding offer.
Financial assistance describes the case in which the selling company helps the buyer to raise the purchase price. Such assistance is prohibited in many legal systems (example: Section 71a (1) of the German Stock Corporation Act).
Financial covenants are those provisions in a loan agreement that oblige the borrower to meet certain financial targets during the term of the loan.
Financial debt is a collective term for all liabilities serving to finance a company (debt).
Financial due diligence
The financial due diligence is a sub-area of the company audit (due diligence). In the preparation of a company acquisition, the financial due diligence process involves in particular examining the assets, earnings and financial position of the target company.
A financial investor invests in target companies in order to generate a financial profit. With this objective, the financial investor differs from a strategic investor.
The financing of venture capital investments takes place in so-called financial rounds. After the first round of financing, in which a start-up is provided with initial venture capital, further rounds of financing follow to finance its growth. In practice, these rounds are sequentially ordered according to the letters of the alphabet (Series A, B, C, etc.).
The Financial Statement is the American term for the annual or interim financial statements of a company.
The financing-out is a contractual reservation of financing. This means that the buyer can withdraw from the contract if he does not succeed in obtaining the loan funds required for the external financing of the purchase price.
If a risk is identified during the due diligence process, this is known as finding.
First demand guarantee
First Demand Guarantee means in English "guarantee on first demand". This means that someone who is claimed under a First Demand Guarantee must pay immediately and may not refuse payment on the grounds that the guarantee case did not occur. This question is then clarified in a subsequent recourse process.
Fixed assets are the assets of the fixed assets. These are goods that are available on a long-term basis, such as machinery and land. The counter term to fixed assets is current assets.
A FLIP is a short-term investment, where the exit is determined before the deal is closed.
A FLOP is a total failure of an investment. The FLOP is therefore the opposite of a high flyer.
The flow-to-equity is that part of a company's cash flow that flows to the company's equity investors.
A framework agreement is a framework contract that contains provisions that are to apply to several contracts.
Free cash flow
Free cash flow is the part of cash flow available to the company after deducting necessary investments (capital expenditure or CAPEX) and changes in working capital. The free cash flow is decisive for the calculation of enterprise value using the discounted cash flow (DCF) method.
The proportion of shares that are in free float, i.e. not held by major investors and therefore freely tradable on the market, is known as free float.
Freeze-out is an instrument that is used to force minority shareholders out of the company. This is not done by making use of a statutory exclusion option (squeeze-out), but by exerting pressure on minority shareholders, for example by not paying a dividend.
Friends and Family Program
When corporations, in issuing their shares, prefer certain persons close to them, such as employees, customers, business partners or family members of board members, this is called a friends and family program.
A fund is an investment fund that may only be used for specific purposes in accordance with legal or contractual requirements.
Fundraising is the process of soliciting private equity and venture capital companies and hedge funds for funds from investors (limited partners) for a newly invested fund.
GAAP is an abbreviation for accounting principles and accounting standards called "Generally Accepted Accounting Principles".
GDRs in written form are called "Global Depository Receipts" and refer to a certificate that securitises the ownership of a share.
The term gearing refers to the ratio of equity to debt capital.
General Disclosure refers to a concept according to which the buyer bears the risk, depending on the amount and quality of data, of having overlooked something during due diligence. This risk can be reduced by the buyer agreeing on fair disclosure with the seller.
A general partner is a personally liable partner (general partner) of a limited partnership.
Generally Accepted Accounting Principles
The Generally Accepted Accounting Principles (GAAP) are a collection of generally accepted accounting principles and regulations. Commonly used Generally Accepted Accounting Principles are, for example, the International Financial Reporting Standards (IFRS) and US-GAAP.
The term "German GAAP" is often used in English language contracts and means the principles of orderly accounting (GoB) according to the German Commercial Code (HGB).
In the context of a negotiation, a giveaway is a negotiating position that one party is prepared to give up if the other party agrees to it on another point.
The Global Coordinator is the leader of the banking syndicate in international securities issues.
Going concern basis
A going concern basis refers to the fact that the valuation of a company or individual assets is based on the assumption that the company will continue as an economic unit.
As soon as a public limited company withdraws from the stock exchange (for example through delisting), one speaks of going private.
The initial public offering of a company is called going public.
A good leaver is a shareholder (participating manager) who leaves the company due to personal circumstances beyond his control such as death, age or disability.
Goodwill is the difference between the current market value and the acquisition price of a company. This difference, which is also called goodwill, results from the fact that the buyer is often prepared to pay a higher amount than the actual current market value for strategic reasons, for example, because the company has a well-known brand name.
The legal system that is subject to a contract is called Governing Law. In internationally concluded contracts, the parties are usually free to choose the applicable law (Choice of Law Clause).
During a grace period, a loan is grace-free, which means that the debtor may have to pay the interest.
A greemail is a business offer from a major shareholder. Either the major shareholder seeks a hostile takeover of the target company or the target company buys the shares from the shareholder at a price above the stock market price.
A greenshoe refers to the agreement which enables the banks accompanying the issue in the context of an IPO (Initial Public Offering) to allocate more shares to the prospective buyers than originally intended (over-allotment). In this way, the underwriting banks can stabilise the share price in the event of an oversubscribed offer by increasing the share offering.
The agreement in a loan agreement that obliges the borrower to pay the bank the agreed amount in nominal value is called the gross-up clause. This means that charges and taxes in particular must not lead to a reduction in the amount. In a company purchase agreement, such a clause has the effect that the party liable to pay damages must increase the amount of compensation by the amount of tax payable on it by the injured party.
Guarantee on First Demand
A Guarantee on First Demand means in English "guarantee on first demand". This means that someone who is claimed under a Guarantee on First Demand has to pay immediately and may not refuse payment with the argument that the guarantee case did not occur at all. This question is then clarified in a subsequent recourse process.
The person who, in the context of a credit agreement, merely assumes joint and several liability without being allowed to draw down the credit himself is called a guarantor.
Gun jumping is a term for the unacceptable price increases of securities before they have been admitted to trading.
A merely passive support of an investor's investment is called a hands off. Here, the investor does not intervene directly until an exit, but allows the managers of the company to act freely.
Hands on support can be described as active support and means that an investor actively supports the management and is interested in a rapid increase in value (participation in advisory boards, supervisory boards and activities beyond that).
Hard underwriting refers to the guarantee of an issuing bank to the issuer that the shares offered will actually be sold on the market at the price offered. If there is insufficient demand, the banks themselves must purchase the remaining stock at the offer price. In practice, hard underwriting, also known as commitment underwriting or firm underwriting, is rare. More common is the issue by way of bookbuilding.
Heads of Agreement
In a Heads of Agreement, the key points of an intended contract are fixed by the contracting parties. The term "term sheet" is used almost identically. The binding nature of the key points depends on the structure of the agreement.
The party that assumes the risk to be hedged under a hedging agreement (see also Hedging Agreement) is called the hedge counterparty.
A hedge fund is a fund that invests its funds largely in derivatives on the futures market or exploits price differences of financial instruments through other innovative products, which can generate high returns in a short period of time. Hedge funds are subject to no or at least only minor regulatory obligations.
Hedging is the name given to a hedging transaction that serves to limit certain risks. Almost all types of risks can be hedged on the capital market. The majority of hedges relate to interest or exchange rates.
The Hedging Agreement is a contract in which the parties agree on a hedging transaction. The standard ISDA models are used for this purpose.
The Herfindahl-Hirschman Index is used as an indicator for antitrust prohibitions, as it provides a statistical measure of market concentration. It is used, for example, to measure the effects of concentration, e.g. in the case of company mergers.
In a hive-down, a part of a company is transferred to a subsidiary or sub-subsidiary by means of a spin-off, spin-off or individual transfer of assets.
The hockey stick is the term used to describe a steep and sustainable development of the company's financial ratios in a turnaround situation. The Hockey Stick bears this name because the graph in such a situation resembles the shape of a hockey stick.
The term hold-back refers to the withholding of services owed. In the context of M&A transactions, hold-back describes the partial withholding of the purchase price by the buyer, who thereby secures possible warranty claims against the seller. Thus, a hold-back has the same function as an escrow (see also Escrow), with the difference that no bank or escrow agent has to be involved.
HoldCo is the abbreviation of holding company (see also Holding Company) and is another term for the parent company of a group of companies.
Hold Harmless Clause
A hold harmless clause is a contractual provision that obliges one party to indemnify another party against certain risks, e.g. claims for damages.
A holding company (abbreviated as Holding or HoldCo) is a parent company of a group of companies. As a rule, the holding company does not itself carry out operational activities, but merely holds interests in operationally active companies.
In the case of a hostile takeover, a public takeover bid is made to the shareholders against the will of the management of a listed company (target company).
A hurdle rate is the calculatory basic interest rate of the investors (limited partners), for example of a venture capital fund. Only when the hurdle rate has been exceeded does the management of the fund receive a profit share (carried interest).
Hurt money is a special form of contractual penalty for company acquisitions. It is agreed in the event that one of the parties is at fault and the company purchase contract is not concluded or executed.
IAS is the abbreviation for International Accounting Standards (see also International Accounting Standards), which is a set of rules for the worldwide harmonisation of accounting and financial reporting.
ICC Arbitration is an institutionally administered arbitration procedure of the International Chamber of Commerce (ICC). The ICC provides arbitration rules that determine the details of the arbitration procedure.
IFRS is the abbreviation for International Financial Reporting Standards (see also International Financial Reporting Standards). These are standards for accounting and financial reporting.
The term IM is the abbreviation for Information Memorandum (see also Information Memorandum). This is a written summary of information about a company that is up for sale.
The Inceditor Agreement is a contract that regulates the relationship between the lenders and determines the priority of their claims against the borrower in the case of financing with several lenders.
The English term "incentive" refers to a bonus that is often used to motivate employees or management. Examples of an incentive are cash benefits such as a bonus or benefits in kind such as a company car.
Increased Cost Clause
Lending banks use an increased cost clause to protect themselves against cost increases. By agreeing an increased cost clause, the borrower is obliged to compensate for the increased costs.
An incubator is an organisation (often public funding agencies, universities or industry associations) that provides start-ups with premises and consulting services.
Indebtness is the term for debt in general and the indebtedness of a company in particular.
The term indemnity refers to a contractual agreement in which one contracting party undertakes to pay for the potential damages or losses of the other person, as is customary in insurance business, for example.
An Indicative Bid (Synonym Indicative Offer) refers to a first, still non-binding offer, which an interested buyer submits for the target company within the framework of an auction procedure (auction).
An indicative offer (synonym Indicative Bid) refers to a first, still non-binding offer, which an interested buyer makes for the target company in the course of an auction procedure (auction).
Information covernants (or information undertakings) are clauses in a loan agreement that oblige the borrower to regularly inform the lending bank about certain facts.
The Information Memorandum (IM) is a written compilation of information about a company up for sale, which the seller prepares or has prepared before the start of an auction. In practice, the Information Memorandum is used as the basis for the Indicative Bid (see also Indicative Bid).
Information Undertakings (or Information Covenants) are clauses in a loan agreement that require the borrower to regularly inform the lending bank about certain facts.
In Good Faith
This term is used to describe sincere and honest business behavior
Initial Public Offering
The Initial Public Offering (IPO) is the English term for the initial public offering of a company (going public). With an Initial Public Offering, the company receives new capital and the former owners are enabled to sell their shares in the company at a profit.
Insiders are persons who have access to information about a listed company that is not publicly known.
Insider trading or insider trading is a process in which a person uses information unknown to the public to enrich himself or herself in the course of his or her own securities transactions. Insider trading is punishable by law.
Insourcing (alternative terms are backsourcing and restocking) describes the opposite process of outsourcing, in which processes and functions are integrated into a company. For example, insourcing is a means of reducing dependency on external suppliers, thereby increasing production quality and improving planning.
An institutional investor is a pure capital investor (such as venture capital funds, asset management or private equity funds) who tries to invest his capital in companies as profitably as possible. This is in contrast to a strategic investor (see Strategic Investor), who pursues strategic as well as financial interests.
Intangible assets (also called intangibles for short) are immaterial assets such as investments or industrial property rights (intellectual property). The counterpart of Intangible Assets are Tangible Assets.
Intellectual property (IP) comprises all types of industrial property rights such as utility models, patents, design patents, trademarks, copyrights, rights to a name, software rights and similar property rights.
An agreement which, in the case of financing with several lenders, regulates the relationship between the lenders and determines the priority of their claims against the borrower is known as an intercreditor agreement.
The interest margin is the interest premium that the lender receives on the refinancing interest rate.
Internal rate of return
The internal rate of return (IRR) is the internal rate of return used to calculate the return on an investment. This is a discount rate that is applied to the cash flows expected from the investment so that the net present value of the investment is zero.
International Accounting Standards
The International Accounting Standards (abbreviated as IAS) are a set of rules for the worldwide harmonisation of accounting and financial reporting. The Accounting Standards Committee (IASC) published them between 1973 and 2001. The existing standards are still valid.
International Financial Reporting Standards
The International Financial Reporting Standards (IFRS for short) are standards for accounting and financial reporting that have been issued by the International Accounting Standards Committee (IASC) since 2001. Capital market-oriented companies with their headquarters in the EU generally prepare their consolidated annual financial statements in accordance with IFRS, as the European Union has decided to adopt the International Financial Reporting Standards.
International Securities Identification
The International Securities Identification (also known as ISIN in the short form) is a twelve-digit letter-number combination for the unique identification of securities of all kinds.
The investment committee of a company advises the management on all issues relating to investment transactions, investment policy and business expansion. In a stock corporation (AG), this committee is usually composed of members of the supervisory board.
Investment grade is an assessment of the creditworthiness of a debtor. It corresponds to a credit rating of at least "BBB" or "Baa3" and is therefore considered "(not yet) speculative".
A position in a private equity or venture capital company is the investment manager. He is responsible for identifying and managing investments.
An investment bank is a bank that specializes in advising clients on mergers and acquisitions, IPOs and other capital market transactions.
The term investor relations refers to the communication of a listed company with its future or current investors.
The IPO is the abbreviated form of the term Initial Public Offering. This refers to the initial public offering of a company (going public). With an Initial Public Offering, the company receives new capital and the former owners are enabled to sell their shares in the company at a profit.
The IRR is the abbreviation for Internal Rate of Return, which is the internal rate of return used to calculate the return on an investment. In concrete terms, it describes a discount rate that is applied to the cash flows expected from the investment so that the net present value of the investment is zero.
The ISIN (or, in its written form, the "International Securities Identification Number") is a twelve-digit letter-number combination for the unique identification of securities of all kinds.
An issuer is an issuer of securities.
A joint venture is a joint venture that generally serves the purpose of long-term strategic partnership and arises when parts of two companies are merged to form a new entity under company law.
The term junior debt refers to debt that is only secured and serviced on a subordinated basis.
Joint and Several Liability
Joint and Several Liability means the joint and several liability of several parties for one obligation.
A key account is a particularly important customer of a company.
Key account management
Key account management describes the way in which a particularly important customer is looked after in a company.
Key performance indicator
A particularly important key figure that is used to determine the success of a company is called a key performance indicator (KPI).
A kickback is a colloquial term for a commission or a bribe.
The term consolidation competition refers to the race of companies to achieve leading market positions in consolidating (concentrating) markets by means of a merger and thus to achieve competitive advantages, such as technological advantages, economies of scale or market entry.
A KPI is the short form for a Key Performance Indicator, which expresses a key figure that is central to the evaluation of the company's success.
Later-stage financing describes the financing of a start-up (for example a venture capital company), which is in the more mature phase of its development.
An LBO is the abbreviation for a leveraged buy-out (see also Leveraged Buy-out), which describes the acquisition of a company with partial financing of the purchase price by means of debt.
LC is the abbreviated form for Letter of Credit (see also Letter of Credit) with which a bank gives a promise of payment, which is usually structured like a bank guarantee.
The bank that assumes responsibility for structuring the loan commitment and reselling parts of the loan in the case of a syndicated loan is called the lead arranger.
The investor who leads the consortium of financial investors in an investment is called the lead investor.
A leaver scheme is a contract that regulates management participation when a manager leaves the company.
Legal due diligence
The examination of the legal circumstances of the target company carried out during a company audit (see also Due Diligence) is called Legal Due Diligence. A legal due diligence is often carried out as part of a company acquisition or an IPO.
A legal opinion is a legal opinion with regard to international legal issues. It serves to ensure that international treaties have been concluded in a proper and legally binding manner.
The Lehman scale is a degressive scale of commissions "invented" by the investment bank Lehman Brothers in the mid-1970s, which involves, for example, 5% commission for the transaction volume (TAV) up to €1 million, 4% for the TAV portion above €1 to 2 million and so on.
Letter of Comfort
The Letter of Comfort or Comfort Letter describes the declaration of a parent company in which it promises to help its subsidiaries in case of financial difficulties.
Letter of credit
The Letter of Credit is also abbreviated as LC or L/C and describes a promise of payment by a bank, which is usually structured like a bank guarantee. The Letter of Credit serves, for example, to secure a purchase price payment claim in international trade.
Letter of intent
The Letter of Intent (also known as Lol for short) is a unilateral written declaration by one of the contracting parties to conclude a targeted contract under the conditions specified in the Letter of Intent. In M&A practice, a lol comes into existence when a corporate buyer declares its intention to acquire the target company on certain conditions at a certain purchase price. Apart from the letter of intent, the letter of intent usually contains provisions on exclusivity, reimbursement of transaction costs (cost coverage), break-up fees and confidentiality obligations.
Leverage is a leverage effect in which the return on equity is increased by borrowing. For this reason it is also called leverage.
Leveraged buy-out (in the short form LBO) refers to the acquisition of a company with partial financing of the purchase price through debt.
The term liabilities is a collective term for liabilities of all kinds, whereby in the M&A business a distinction is made between current liabilities and financial debt.
Lien is a security interest attached to a thing, such as a mortgage.
Clauses in loan agreements that restrict the lending bank's right to access loan collateral are called Limitation Language.
A Limited Company is a company with limited liability (in short GmbH).
A limited partner is a limited partner of a limited partnership. When setting up a new fund, venture capital or private equity funds ask banks, insurance companies, pension funds and wealthy individuals whether they would like to invest in the fund. If they agree, they assume the position of a limited partner.
The term limited partnership means a limited partnership of the Anglo-Saxon type, which is characterised by the fact that one or more limited partners (limited partners) and a general partner with unlimited personal liability (general partner) are liable for the obligations of the limited partnership.
Liquidation Preferences (or in English "Liquidation Preferences") regulate that in the event of an exit, individual shareholders receive preferential proceeds before the other shareholders are involved. The Liquidation Preference rule comes into effect as soon as a company is liquidated or dissolved.
A listing is generally defined as the admission of a security to the stock exchange.
Before securities are admitted to listing, the issuer must publish a prospectus containing information about the issuer and the securities offered. This listing prospectus is referred to as the Listing Particulars. The credit institutions (underwriters) commissioned with the issue are responsible for the accuracy and completeness of the Listing Particulars and are therefore liable, in addition to the issuer, for any misinformation regarding the financial and earnings position, risks and business activities of the issuer.
LMA is an acronym for Loan Market Association, which refers to an association of London banks that promotes the business of corporate lending.
LMA Loan Agreement
The LMA Loan Agreement is a standard loan agreement drawn up by the Loan Market Association, which has established itself as an international standard for corporate and acquisition loans.
Loan Market Association
The Loan Market Association (LMA) is an association of London banks that promotes the business of corporate lending.
A lock-up agreement is intended to prevent existing shareholders from burdening the share price with their sales in the period immediately after the IPO. The lock-up agreement prohibits existing shareholders of a stock corporation listed on the stock exchange from selling shares from their own holdings for trading on the stock exchange within a period of usually 6 to 12 months (lock-up period) after the initial listing of the share.
The lock-up period is a contractually agreed holding period for securities. It is determined within the framework of a lock-up agreement (see also Lock-up Agreement) and is intended to prevent existing shareholders from adversely affecting the share price in the period immediately following the IPO through their sales.
LoI is the abbreviation for a Letter of Intent (see also Letter of Intent), which refers to the unilateral written declaration by one of the contracting parties to conclude a targeted contract under the conditions specified in the Letter of Intent.
Loss carry forward
The term loss carry forward refers to a loss carried forward to subsequent years.
Ltd. is the abbreviation for the company form Private Limited Company.
The term MAC is the abbreviated form for Material Adverse Change (see also Material Adverse Change), which refers to the substantially adverse change in the circumstances of the contract.
The MAC Clause refers to a clause in a company purchase agreement or financing agreement that grants the company buyer or the lending bank the right to refuse to execute the purchase agreement or pay out the loan in the event of a material adverse change (see also Material Adverse Change) or material adverse events. The seller's risk that the MAC clause grants the buyer a right to renegotiate or withdraw from the contract is contained by the fact that a MAC clause usually contains further specific terms or thresholds.
The term MAE is the abbreviated form for Material Adverse Effect and Material Adverse Event (see also Material Adverse Effect and Material Adverse Event) which in both cases refers to events that have an adverse effect on a contract.
Majority Banks - Majority Lenders
The terms majority banks or majority lenders describe those banks within a banking syndicate that together represent a majority interest in the loan as defined in the loan agreement.
Management accounts means the financial statements prepared by the management of a company on an ongoing basis, which, unlike annual financial statements, do not have to be audited or certified.
A management buy-in (MBI) is the acquisition of a company by an external management team in order to take over the management together with or instead of the existing management.
A management buy-out (MBO) is the acquisition of a company by its own management.
Management Discussion and Analysis
The Management Discussion and Analysis (MD&A - the term Operating and Financial Review is also frequently used) refers to the comparison of the current business figures with those of the previous year, as carried out by the management. The Management Discussion and Analysis can be found in every annual report and often also in stock exchange prospectuses.
The term management fee is used to refer to the remuneration that a company receives when it conducts business for another company, and the term management fee is also used to refer to the fees that a managing underwriter receives for his management activities in a consortium.
The discussions that a prospective buyer of a company conducts with the management of the target company in the course of its due diligence (see also Due Diligence) are called Management Interviews.
A management letter is a written statement by the managing directors of a company explaining the accounting policies used in preparing the annual financial statements, relevant transactions and risks requiring provisions. The Management Letter is sent to the company's auditors for the purpose of auditing the annual financial statements.
Management Participation refers to a social participation of the management of a company in the company for the purpose of giving managers an incentive to increase the value of the company.
The Management Presentation is an important part of Due Diligence (see also Due Diligence) and describes the presentation of the company and the management in the context of a company sale.
A manager can generally be described as the head of a business unit. Depending on the context of meaning, managers are also generally referred to as managers.
A Managing Underwriter (or Lead Manager or Global Coordinator) is a syndicate leader of a banking syndicate that accompanies the new issue of a security.
Mandated Lead Arranger
A mandated lead arranger is a synonym for a lead arranger, which refers to a bank that assumes responsibility for structuring the loan commitment and reselling parts of the loan in the case of a syndicated loan.
Mandatory prepayment refers to a mandatory special repayment (prepayment) by the borrower that is regulated in the loan agreement.
The premium that the bank charges in addition to the interest assessment base is called margin.
The Margin Ratchet is a mechanism whereby the Margin charged by the bank (see also Margin) changes depending on the development of the financial ratios of the company (which, for example, was bought in a management buy-out). For example, the margin of a syndicated loan is reduced if the financial figures specified in the loan agreement develop positively.
Manipulation of stock market prices, for example by misleading information, is called market abuse.
The market cap is a short form of market capitalization (see also Market Capitalization) and describes the market capitalization of a company listed on the stock exchange.
Market capitalization (Market Cap) is the English term for the market capitalization of a listed company. The market capitalization reflects the current market value of the company and is calculated by multiplying the number of shares by their value.
A market disruption is a term used to describe a market disruption in which banks are no longer able to refinance themselves on a cost-covering basis.
The term market maker refers to an exchange participant or securities dealer (such as a bank) that quotes binding buy and sell prices for a security and is prepared to enter into a corresponding contract.
Market Flex Clause
Syndicated loans usually contain a clause (the market-flex clause) that allows the bank, during the resale of the loan, to unilaterally adjust certain loan conditions, such as maturity or interest rate, in order to achieve the resale.
The Master Agreement is a framework agreement that regulates the essential contractual relationships between parties.
Material Adverse Change
Material Adverse Change (MAC) is the term used to describe a material adverse change in the circumstances of a contract. In the case of a contractually agreed MAC clause (see also MAC Clause), such changes can lead to a contract adjustment or termination.
Material Adverse Effect
A Material Adverse Effect (MAE) is an event that has particularly adverse effects. In company purchase agreements, the term Material Adverse Effect is often used to restrict warranty claims.
Material Adverse Event
A Material Adverse Event (MAE) refers to material adverse circumstances within the scope of a contract. The difference to a Material Adverse Change (see also Material Adverse Change) is that a Material Adverse Event does not require that the circumstances meet the additional criterion of a change in given circumstances. For a material adverse event, the mere existence of the adverse circumstances is sufficient.
Materiality Qualifier means a limitation on a representation or warranty by the use of the word "material", "substantive" or "materiality" or by an indication of the occurrence or non-occurrence, or the possible occurrence or non-occurrence, of a material impairment or material adverse effect on Buyer, whichever is applicable.
The MBI is the abbreviation for Management Buy-in, which refers to the acquisition of a company by an external management team to take over the management together with or in place of the existing management.
The MBO is an abbreviation for a management buy-out in which a company is acquired by own management is acquired.
MD&A is the short form of the term Management Discussion and Analysis (see also Management Discussion and Analysis), which refers to the comparison of the current business figures with those of the previous year, as carried out by the management.
The Mediation Clause is a clause according to which the parties agree that future disputes will first be settled by mediation. If the mediation was unsuccessful, the parties can go to court.
Memorandum of Understanding
The Memorandum of Understanding is a letter of intent to purchase a company or other corporate transaction, which is issued by the potential buyer and the seller. In contrast to the Letter of Intent (see also Letter of Intent), the Memorandum of Understanding thus takes both sides into account.
A merger (in common parlance also called merger) describes the amalgamation or fusion of at least two legally independent companies into one economic and legal entity. In the course of a merger, at least one of the two companies loses its legal independence.
The clearance of a merger project by the antitrust authorities is known as a merger clearance.
The competition law consequences of a merger are examined by the Cartel Office. The legally required examination of such business combinations is called merger control.
Mergers and acquisitions
Mergers & Acquisitions (M&A) refers to transactions in which the ownership of one or more companies is transferred or consolidated with other entities.
Mezzanine capital is a hybrid of equity and debt. This type of capital injection is made possible, for example, by dormant holdings, loans with profit participation rights or profit participation certificates.
Companies with a medium market capitalization are called Mid Cap. The limits vary between EUR 250 million and EUR 1 billion (lower limit) and between EUR 1 billion and EUR 5 billion (upper limit).
Milestones are contractually agreed interim targets for the success of an investment, the achievement of which triggers consequences. In practice, such milestone agreements are often found in the context of venture capital investments.
The MoU is an abbreviation for the Memorandum of Understanding (see also Memorandum of Understanding), which is a declaration of intent made by the potential buyer and the seller to purchase a company or other corporate transaction.
Multiples are used in the calculation of company value and calculate the purchase price of a company by multiplying certain key figures (e.g. EBIT) with a factor customary in the industry.
N/A can have two different meanings. First: not available - not giving information; second: useful expenses - a euphemism for a bribe.
The NDA is an abbreviation for a Non Disclosure Agreement (see also Non Disclosure Agreement) and refers to a confidentiality agreement.
The outsourcing of certain business areas (for example, production or project work) to nearby foreign countries is called nearshoring.
Net assets are the sum of all assets of a company (fixed assets + current assets) minus liabilities. In German, net assets are also referred to as net assets.
Net debt is the sum of all financial liabilities less cash and cash equivalents.
The equity capital of a company is called net equity.
Net income is defined as the net profit of a company from sales minus costs, depreciation, interest and taxes.
Net Present Value
The net present value is the present value of an investment. It is determined by discounting the cash flow (see also Cash Flow).
NewCo is an abbreviation for New Company. In an M&A case, this newly founded company serves, for example, to take over the assets of the target company.
Non Disclosure Agreement
A Non Disclosure Agreement (NDA) is a non-disclosure agreement that party A has party B (for example, a start-up from a venture capital investor) sign in order to protect their own data against misuse.
The NPV is the short form of the Net Present Value (see also Net Present Value) and describes the present value of an investment after discounting.
An ODD is the abbreviation of Operational Due Diligence (see also Due Diligence), in which the operational aspects of a company are examined as part of an M&A process.
The term offer is a term for an offer to conclude a contract, as a non-binding offer (indicative offer) or binding offer (binding offer).
Offshoring refers to the outsourcing of parts, such as production or project work, to distant countries.
Operating cash flow
Operating cash flow is that part of the cash flows that originates from the operating business.
Operating profit (also known as operating income or EBIT) is a company's profit from ordinary activities before interest and taxes.
Ordinary Course of Business
The ordinary business activity of a company is called the Ordinary Course of Business. In a company purchase agreement, exceptional risks are often distinguished from the risks of the ordinary course of business and representations and warranties are limited to events outside the Ordinary Course of Business.
The term outsourcing refers to the outsourcing of company activities to an entity outside the company. For example, parts of production are outsourced to external service providers.
The P/E ratio is the abbreviation for the so-called price-earning-ratio (see also price-earning-ratio), which describes the price-earnings ratio of a share.
P&L is the short form of a Profit & Loss Statement. This is the profit and loss statement (P&L) of a company.
PAC Man Defence
PAC Man Defence is a defensive measure against a hostile takeover bid in which the target company attempts to acquire a majority stake in the bidder in order to control it.
A superordinate company is called a parent.
When a parent company guarantees its subsidiary, this is called a "parent guarantee".
The Payment-in-Child (PIK for short) is a payment in kind instead of a cash benefit.
Penalty is the English term for a contractual penalty.
Percentage of Completion
Depending on the degree of completion of a project, advance payments are made in customer business, which are referred to as percentage of completion. In contrast, Project Completed is the payment of the entire invoice after the project has been handed over.
A pipeline is a list of a company's projects that are in the initiation or preparation phase.
A pitch can be the application of an investment bank, a law firm or a transaction house, e.g. in the context of a beauty contest, or the presentation of a start-up's business idea to venture capitalists.
PMO is an abbreviation for Project Management Office (in German Projektbüro)
A Poison Pill is a defensive measure against a hostile takeover (see also Hostile Takeover).
A portfolio is a collective term for transactions, strategic business units, securities or investments that a company manages or owns.
A portfolio company is a company that belongs to the portfolio (see also Portfolio) of a company, private equity or venture capital firm.
Post Merger Integration
Post Merger Integration (PMI) refers to implementation and integration measures that take place after closing.
PPP is the abbreviation for Public Private Partnership, which means the cooperation of the public sector with private companies for the realization of infrastructure projects.
Pre Acquisition Audit
A pre-acquisition audit is the procurement of reliable figures in the year of a final audit to prepare the seller for the sale of a business.
The pre-emptive right is the English term for a right of first refusal.
Pre-emptive Subscription Right
The Pre-emptive Subscription Right represents the contractually guaranteed right of a shareholder to subscribe to so many shares that the percentage shareholding in the company is not reduced.
A preferred bidder is a designation for a bidder to be preferred after the first purchase offers.
Preferred Stock (also called pref. shares) is the English term for preferred shares.
A Preliminary Bid (also called Indicative Bid) is a non-binding offer in an auction.
A prepayment is the repayment of a loan before the agreed due date.
Present value is the cash value of an investment. The present value is determined by the discounted cash flow (see also Cash Flow).
The price-earning-ratio (P/E ratio for short) is the price-earnings ratio of a share.
Private equity is a form of investment in which the investment is not tradable on stock exchanges.
Private equity firm
A private equity firm is a company that sets up a private equity fund (see also Private Equity Fund).
Private equity fund
A private equity fund is an asset (the fund) that was raised by a private equity firm (see also Private Equity Firm).
Private limited company
The Private Limited Company is a limited liability company of the Anglo-Saxon type.
Private M&A refers to the merger or takeover of companies that are not listed on the stock exchange.
A private placement is understood to be the private placement of securities without a prospectus audited by the supervisory authorities.
The schedule of an investment bank with the essential steps of a company sale process is called Process Letter.
Profit & Loss Pooling Agreement
The Profit & Loss Pooling Agreement is the English term for a profit transfer agreement.
Profit & Loss Statement
The Profit & Loss Statement (P&L for short) is the English term for the profit and loss account.
Profit participation right
Profit participation rights are a mixture of equity and debt capital and secures the participation in net profit without voting rights or other rights.
The provisions on the liabilities side of the balance sheet for contingent liabilities are called commissions.
Public M&A refers to those M&A transactions that are based on public takeovers or securities issues. Public M&A is therefore to be distinguished from private M&A (see also Private M&A).
A public offer is the offer of securities to a broad public (usually based on a detailed prospectus).
Public private partnership
The term public-private partnership (PPP) refers to the cooperation between the public sector and private companies to implement infrastructure projects.
The term public-to-private means the withdrawal of a listed company from the stock exchange.
For example, a put option (in English sales right) describes the possibility of selling an asset to a defined buyer at a predetermined price.
Q&A is the short form for Questions & Answers. It occurs, for example, during due diligence when questions are asked to the seller.
Questions & Answers
Questions & Answers (Q&A for short) refer, for example, to questions that are asked to a seller in the course of a due diligence.
A rating is the assessment of the creditworthiness of debtors.
Recapitalization refers to the change in capital resources or capital structure.
The term Receivables is the English term for the receivables of a company.
Red Flag Report
A Red Flag Report is a concise Due Diligence Report (see also Due Diligence), which lists only the problem areas.
REIT is the abbreviation for Real Estate Investment Trust. This is a form of investment that enables investment in real estate on the basis of exchange-traded shares.
Representations & Warranties
Representations & Warranties (in short Reps) are an expression of the seller's warranties regarding the legal and economic circumstances of the target company.
The term Reps is a colloquial term for Representations & Warranties, meaning the seller's warranties regarding the legal and economic circumstances of the target company.
A resolution is a formal decision taken, for example by a board of directors.
The restructuring measures of a company are also called restructuring.
The basic remuneration of an M&A consultant is called retainer. It is in contrast to the success fee (see also Success Fee) and the transaction fee (see also Transaction Fee).
Return on Capital Employed
Return on capital employed (RoCE for short) is a profitability indicator in which net income (see also net income) is set in relation to capital employed (see also capital employed).
Return on equity
Return on equity (RoE for short) is the English term for the return on equity.
Return on investment
Return on Investment (RoI) is a performance indicator of an investment. It is calculated from the net proceeds (cash flow minus invested funds) by invested funds.
The term reverse engineering refers to the reconstruction of a product. For example, in the run-up to company mergers, it is discretely examined how products are manufactured at the target company by dismantling the product into its individual parts and examining them. This makes reverse engineering a very effective competitive analysis instrument.
A reverse takeover refers to a situation in which an acquired company reverses the takeover and gains control over the acquirer.
Right of First Refusal
The Right of First Refusal is the English term for a pre-emptive right. It is in contrast to the Pre Emptive Right, as it does not require a contract with a third party.
Risk Adjusted Rate
In a company valuation, a risk adjusted rate refers to a discount rate that includes a risk premium.
Risk management is a management task that aims to identify and manage risks.
RoCE is the abbreviation of return on capital employed and is a profitability indicator that compares net income (see also net income) with capital employed (see also capital employed).
RoE is the abbreviated form of the term Return on Equity.
Sale and lease-back
A sale and lease-back is the sale of assets (for example, real estate) that are subsequently leased back. The purpose of this procedure is to increase liquidity.
Sale and Purchase Agreement
A sale and purchase agreement is a contract of sale for either assets or shares.
Schedules are attachments to a contract or report.
The creeping expansion of the project scope due to an increasing number of change requests during the course of the project is called scope creep.
Screening is a systematic selection procedure that serves primarily to determine prioritizing candidates for a company acquisition.
Second Stage Funding
The capital preservation of a company that is in the growth phase is known as second stage funding. It thus follows Early-stage Financing (see also Early-stage Financing).
The seed capital that venture capital companies or business angel start-ups provide in the first phase of a company foundation is called seed capital.
In the context of M&A, sell-side refers to the seller's side and, in capital market transactions, to the issuing investment bank.
The term senior debt refers to borrowed money that a compony must repay first after it goes out of business. Therefore, senior dept takes priority over other forms of debt.
Service level agreement
A service level agreement is an agreement between a service provider and a company about services and remuneration (to be outsourced). The service level agreement plays a role in carve-out (see also Carve-out) and outsourcing (see also Outsourcing).
The share of a company, for example a share, is called a share.
The share deal is a form of company acquisition in which the buyer acquires the shares in the company for sale from the seller. The share deal is therefore in contrast to the asset deal (see also Asset Deal).
Share purchase agreement
A Share Purchase Agreement (short SPA) is a company purchase agreement by way of a share deal (see also Share Deal).
The owner of a share in a company is called a shareholder.
The term shareholder loan describes a debt-like form of financing provided by the shareholders of a company.
Shareholder value refers to an approach that focuses on material value and responsibility for the shareholder (see also Shareholder).
A shareholder's agreement is a supplementary agreement to the articles of association, which regulates commercially sensitive data that is not to be made public.
A shelf company is a company that has never started a business, but was founded only so that it could be acquired later. The basic idea behind this was that it was quicker for founders to buy and rename an existing company than to start a completely new company. However, this proved to be wrong, which is why shelf companies are largely a thing of the past.
A side letter will include those ancillary agreements which are not to be regulated in the main contract.
Signing is the signing of a contract, e.g. a company purchase agreement. However, the contract is only completed in the second step, the closing (see also Closing).
A site visit, for example, which is carried out as part of a due diligence (see also Due Diligence), is called a site visit.
Smart Money is the know-how or network that an investor can bring to bear in the context of a company investment. This is therefore not actually flowing money.
SPA is an abbreviation for a Stock Purchase Agreement and a Share Purchase Agreement (see also Share Purchase Agreement).
Special purpose vehicle
In M&A transactions, a special purpose vehicle (SPV) is a company established for a specific purpose, e.g. to purchase the target company.
The term spin-off means the spin-off of dependent divisions of a company. In contrast to outsourcing (see also Outsourcing), the spun-off part of the company becomes an independent company.
Split-off means, on the one hand, in American usage, the splitting off of a company, whereby the shareholders of the parent company receive the shares of the spun-off subsidiary, on the other hand, the term "split-off" is a synonym for the term "spin-off" in colloquial language (see also Spin-off).
Split-up means the splitting up of a company, especially to compensate a shareholder. This creates companies with different groups of shareholders.
A sponsor is a supporter of a project outside the project.
The difference between two interest rates or two prices is called the spread.
SPV is the abbreviation for Special Purpose Vehicle, which in M&A transactions refers to a company established for a specific purpose, for example to purchase the target company.
Squeeze-out is a term for the compulsory exclusion of minority shareholders.
Stakeholder is a collective term that includes all groups of people who have an economic interest in one of the companies involved in the transaction. These include customers, suppliers and shareholders.
Stakeholder value is an approach that pays special attention to the well-being of employees and the political and social environment when aligning corporate strategy.
Staple Financing is a form of acquisition financing in which the bank commissioned by the seller encloses an offer for financing with the sales prospectus.
A start-up is a growth-oriented newly founded company that is in the start-up phase.
The term steering committee in project management refers to the higher-level decision-making body for an individual project or group of projects (e.g. M&A project)
A step-up refers to an increase in the carrying amount of an asset to provide additional depreciation opportunities. A step-up is usually carried out in an asset deal because the purchase price paid exceeds the book value of the company and the buyer can increase the assets up to the amount of the partial values for tax purposes.
A silent partnership is an investment that is not entered in the commercial register.
A strategic investment is an acquisition of a company where a strategy is pursued, such as the takeover of a competitor, in order to reduce costs and improve the market position.
A strategic investor is an investor who is usually operationally active and who pursues not only financial, but primarily strategic goals with his investments in companies.
A success fee in M&A is a commission paid to the transaction consultant when the closing is reached.
The term sweet equity refers to the acquisition of equity in a company on preferential terms.
Tangible assets refer to physical assets and land. Tangible assets are therefore the counterpart of intangible assets.
The takeover of another company (e.g. via a public takeover offer) is called a take-over.
The term target refers to a target company that is to be acquired in the context of an M&A transaction.
Tax Assessment is the English term for a tax assessment.
Tax due diligence
In a company audit (see Due Diligence), a tax due diligence serves to determine the tax risks.
A tax gross-up means the increase of a payment amount by the taxes that the payee has to pay to receive the amount.
A Tax Haven is a place or country that offers low rates of taxation for individuals and companies. English term for a tax haven and a popular location for holding companies in particular.
A tax indemnity is the obligation of a tax refund, which for example concerns all taxes of a buyer that are incurred before the closing.
The tax shield is relevant as a valuation parameter for the adjusted present value (see also Adjusted Present Value). This is a tax saving that results from the utilization of interest, debt, and other financing costs.
The term teaser refers to a mostly anonymous company presentation by an M&A consultant. He uses the teaser to sound out the interest of potential buyers.
A public offer to the shareholders of a company to purchase their shares is called a tender offer.
A term sheet is a compilation of the key points (terms) of an intended contract.
The term Thin Capitalization refers to the capitalization of a company that consists only to a small extent of equity. Since numerous legal systems have upper limits on the tax deductibility of interest on debt capital, interest on excess debt capital is treated as a hidden profit distribution.
A tombstone is a symbol for a successfully completed financial transaction. An acrylic stone is often used for this purpose, on which the name of the M&A transaction house involved as well as the parties to the transaction are engraved.
The top line is the top line of a Profit & Loss Statement (see also Profit & Loss Statement), in which the sales or revenues are listed.
The success story of a private equity house, a venture capital company or a transaction consultant is called track record.
Trade Payables is the English term for trade payables.
Trade Receivables is the English term for trade receivables.
A trade sale is the sale of a financial investment to a strategic investor. This is one of the typical exit scenarios for a financial investor.
Trading Multiples are the multipliers for the market valuation of a company. Earning multiples and sales multiples, for example, are the most common.
A transaction fee can also be called a success fee and means the success fee of an M&A advisor.
Transaction multiples are valuation multiples derived from comparable transactions.
Transaction Service Agreement
A Transaction Service Agreement is a contract under which the seller provides services for the target for the time during and after the transaction until the buyer can take over the services, for example IT.
Transfer of operations
In the event of a transfer of an undertaking, the owner of an undertaking or part of an undertaking changes by means of a legal agreement. The new holder takes over all rights and obligations from the previous holder.
A Transition Agreement is the agreement on the smooth transfer of a target company from the seller to the buyer. For example (often in return for the payment of a management fee), payroll accounting will continue to be handled by the seller until the buyer has built up its own internal and external resources.
Transitional Services Agreement
In a Transitional Services Agreement (TSA), ancillary agreements and their conditions are discussed in relation to a company purchase agreement. The ancillary agreements in the Transitional Services Agreement relate to services that the seller provides to the target company during a transition period, for example accounting, personnel administration and IT.
The Threshold is a threshold value, which is subject to certain legal consequences if it is exceeded or fallen short of. For example, the seller only owes the buyer compensation if his warranty claims exceed a certain threshold value.
The triangular merger is a merger in which the target company merges with a subsidiary of the buyer. A distinction can be made between a forward triangular merger (merger of the target company with its subsidiary) and a reverse triangular merger (merger of the subsidiary with the target company), whereby the reverse triangular merger is the more frequent case
Triple A rating
The triple A rating (also known as AAA rating) refers to the best possible creditworthiness of a debtor that a rating agency can give. A triple A rating indicates that the risk of default on a bond does not actually exist.
The term Trouble Management refers to the process or organizational unit for solving a specific problem.
The English term trust refers to a trust company or trust assets.
Trustee is the English term for a trustee.
TSA is the abbreviation for Transaction Service Agreement (see also Transaction Service Agreement).
A successful restructuring or successful completion of an economic downturn and the initiation of a positive trend can be described as a turnaround. This is often represented graphically in the form of a hockey stick (see also Hockey Stick).
The Umbrella Clause is a clause according to which in complex M&A contracts with several sellers the sellers are seen as a unit for simplification purposes. This approach can facilitate legal disputes that may arise later.
The term "Undertaking" is used to describe special contractual obligations which the parties to a contract assume outside the normal contractual obligations.
The Unfriendly Takeover is the counterpart of the Hostile Takeover (see also Hostile Takeover). While in the case of an unwanted takeover the management remains passive in the case of the unfriendly take-over, the management actively defends itself in the case of the hostile take-over.
An upstream guarantee is a guarantee that a subsidiary provides for a parent company.
The upstream merger is the counterpart to the downstream merger (see also Downstream Merger). This involves the merger of a subsidiary with the parent company.
A loan granted by a subsidiary to its parent company is referred to as Upstream loans.
US-GAAP is an abbreviation for United States Generally Accepted Accounting Principles and is the current accounting standard for the US capital market.
USP is the abbreviation for "unique selling proposition". This refers to a unique selling proposition with which a company can set itself apart from its competitors.
Valuation is the English term for a company valuation. This is calculated, for example, using the discounted cash flow method (see also Discounted Cash Flow) or with the help of multiples (see also Multiple Valuation).
VC is the abbreviation for venture capital. Venture capital is bundled by venture capital companies and invested in start-ups with high growth potential.
The term VDR is the abbreviation for Virtual Data Room. This is a virtual data room that is used in the context of due diligence (see also Due Diligence).
Vendor Assist is described as the examination of strategic options in volatile and difficult markets. The outcome of the assessment may lead to a decision whether to sell the business in question.
Vendor Assist Products
Information packages provided by the seller or an M&A advisor to support due diligence are called Vendor Assist Products. Vendor Assist Products include financial analysis, for example.
Vendor due diligence
Vendor Due Diligence is a company audit (see also Due Diligence) in which the seller has his own company audited. A vendor due diligence often takes place when the seller wants to spare the prospective buyer the costs of a due diligence or when the seller is not sure about the circumstances of his company. A Vendor Due Diligence can be performed both as an informal service and with a formal guarantee of accuracy.
The loan from a seller to the buyer of a target company is called a vendor loan.
Venture Capital (VC) is a financial instrument used by venture capitalists (venture capital companies) to invest in innovative start-ups.
Venture capital firm
A venture capital firm is a company that sets up venture capital funds (see also Venture Capital).
Venture capital fund
A venture capital fund is a fund that invests in innovative start-ups. The funds in the venture capital fund are provided by so-called limited partners such as banks, pension funds and insurance companies or wealthy private individuals.
A vendor loan is an interest-bearing loan from the seller to the buyer as a building block for financing the acquisition. The terms for this are typically between 1 and 3 years, although 5 years are also possible. The loans are often secured with no or only secondary collateral and serve, among other things, to increase the commitment of the seller.
Virtual data room
A Virtual Data Room (VDR for short) is a virtual data room that is used in the context of due diligence (see also Due Diligence).
WACC is an abbreviation for Weighted Average Cost of Capital (see also Weighted Average Cost of Capital). The WACC is a mixed interest rate of equity and debt
Weighted Average Cost of Capital
Weighted Average Cost of Capital (WACC) is a mixed interest rate of equity and debt. It is a weighted average cost of capital that represents the return on total capital. The Weighted Average Cost of Capital is used to calculate the value of a company.
A white knight is a bidder whom management has called in to help defend against a hostile takeover.
The short-term current assets of a company are called working capital. It is calculated as the difference between the current assets on the asset side of the balance sheet (assets) and the current liabilities (liabilities, provisions) on the liabilities side of the balance sheet. When a company is sold, it is often agreed in the purchase contract how much working capital must be available at the time of the transfer (in order to be able to continue the business normally without having to incur new debt).
The term workstream refers to a progressive process of tasks performed by different groups within an organization that are necessary to complete a single project. For example, the workflow for a production facility may include engineering, design, procurement, manufacturing, quality control, and shipping.
Exchange Electronic Trading. Electronic trading system of Deutsche Börse. In 1997, the system replaced IBIS trading due to improved performance and cost efficiency.
Any member of a German stock exchange can become a Xetra participant. The Xetra system enables investors to buy and sell securities even outside the official trading hours.
Yield refers to the yield of a capital investment in general. It describes the interest or dividend payment of a bond and is usually given as a percentage rate based on the investment asset cost, the current market value or the nominal value.
"Year over year. The abbreviation for the fund performance development compared to the previous year.
Bond without securitised interest; the yield is the difference between the purchase price and the redemption amount.