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).