The owner’s vocabulary
Understand the language.
Ask the better question.
Working definitions for a more useful advisory conversation. Actual rights, obligations, and calculations depend on the relevant documents and professional advice.
- Add-back
A proposed adjustment to reported earnings, often used to discuss an expense that may not continue under an assumed ownership model. It needs evidence and consideration of any replacement cost.
Financial Analysis- Asset sale
A transaction framed around specified business assets and assumed liabilities. Its legal and tax effects depend on the actual structure and documents and should be evaluated by qualified advisors.
Mergers & Acquisitions- CIM
A confidential information memorandum: an organized presentation of a business opportunity for qualified prospective buyers. It supports evaluation and does not replace underlying records or independent diligence.
Business Brokerage- Due diligence
The investigation of a proposed transaction and its supporting information. Commercial, financial, legal, tax, operational, and technical questions may involve different professionals and different scopes of work.
Mergers & Acquisitions- Earnout
Consideration that depends on defined future performance. Measurement rules, control of the business, access to information, and dispute provisions are important questions for the owner’s professional team.
Mergers & Acquisitions- EBITDA
Earnings before interest, taxes, depreciation, and amortization. It is an analytical measure, not the same as cash flow or owner proceeds. Any adjustments should be identified and explained separately.
Financial Analysis- Enterprise value
A value concept focused on the operating business, distinct from the amount a particular equity owner receives. The interpretation and proceeds bridge depend on the analysis and transaction definitions.
Business Valuation- Exclusivity
An agreed restriction on certain negotiations or activities for a specified period. The actual obligations come from the agreement. Counsel should review the terms before an owner grants exclusivity.
Mergers & Acquisitions- Letter of intent
A document setting out proposed transaction terms and process expectations. Some provisions may have binding effect even when the proposed transaction remains conditional. Obtain legal review of the actual document.
Mergers & Acquisitions- Quality of earnings
An investigation into earnings and related financial issues under a defined professional engagement. Owner-side financial preparation is distinct from an independent quality-of-earnings report and from a financial statement audit.
Financial Analysis- Rollover equity
An ownership interest retained or reinvested in connection with a transaction. It carries rights, limitations, and future uncertainty that require appropriate legal, tax, and financial evaluation.
Mergers & Acquisitions- Seller financing
An arrangement in which the seller finances part of a transaction’s consideration and is repaid under agreed terms. It creates continuing exposure and is different from cash received at closing.
Business Brokerage- Transferability
The extent to which the business can continue operating and maintaining its relationships as ownership or leadership changes. Management depth, documentation, and the owner’s role are useful areas to investigate.
Exit Planning- Working capital
In operating discussions, commonly current assets less current liabilities. In a transaction, the included accounts, target, and adjustment mechanism are negotiated definitions that may differ from the general accounting measure.
Financial Analysis
Editorial draft · Prepared for StoneBridge’s review of voice and engagement scope.