Glossary

Later-stage financing

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. 

LBO

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

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.

Lead arranger

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.

Lead investor

The investor who leads the consortium of financial investors in an investment is called the lead investor.

Leaver Scheme

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.

Legal opinion

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.

Lehmann Scale

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

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

Leveraged buy-out (in the short form LBO) refers to the acquisition of a company with partial financing of the purchase price through debt.

Liabilities

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. 

Liabilities

Lien is a security interest attached to a thing, such as a mortgage.

Limitation Language

Clauses in loan agreements that restrict the lending bank's right to access loan collateral are called Limitation Language.

Limited Company

A Limited Company is a company with limited liability (in short GmbH).

Limited partner

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.

Limited partnership

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 Preference

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.

Listing

A listing is generally defined as the admission of a security to the stock exchange.

Listing Particulars

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

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.

Lock-up agreement

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.

Lock-up period

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

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.

Ltd. is the abbreviation for the company form Private Limited Company.