M and A Jargon Demystified PDF

M&A jargon
demystified
kpmg.com/be/mandajargon
Alpha?
LOI?
Grace?
The AMandA
dictionary
MBI?
CoCo?
M&A jargon demystified

Glossary of more than 150 commonly
used terms in company mergers and
acquisitions
Dpt lgal: D/2014/2664/551

ISBN: 978-90-46-57214-6
BP/KPMGMAL-BI14001
Editeur responsable: Hans Suijkerbuijk,
Waterloo Office Park, Drve Richelle, 161 L,
B-1410 Waterloo
2014 Wolters Kluwer Belgium NV
Disclaimer
Nothing in this publication, even in part, may be published, reproduced, translated or
adapted in any form whatsoever, including photocopying, microfilming, recording or
disk, or included in a computerized data bank without the previous express permission
of the editor.
The information provided in this document is general in nature and does not cover a
particular person or entity. While we strive to provide you accurate and punctual information, it is impossible to guarantee the accuracy at the time of receipt or in the future.
It is also not recommended for you to follow this information without the advice of a
professional who specializes in this area and has taken care of thoroughly analyze your
particular case.
We would like to draw your attention to the fact that the views and opinions expressed
herein are those of the author and do not reflect those of the KPMG network in Belgium. The information provided in this document is general in nature and does not refer
to the specific situation of a person or entity.
The author or publisher cannot be held responsible for any damage suffered by the
reader as a result of imperfections in this book.
Foreword
Among professionals who are active in the world of M&A (Mergers & Acquisitions,
a term that is used for a transaction in which a company is acquired or is merged
with another company), the use of jargon is well established, so well in fact that at
times no one else can understand what they are saying.
This book aims to create clarity in the tangle of technical terms. It is aimed at
everyone who is interested in mergers and acquisitions or who would like to
master M&A jargon. It puts simplicity first, so do not expect any scientific or
legal explanations of the terms, but rather a didactic interpretation, based on our
own experience and that of our colleagues from the KPMG network who work
in M&A. After reading this book, you will perhaps possess a more thorough
knowledge of mergers and acquisitions, but we do not recommend using these
practical explanations in negotiations and contracts, or otherwise allowing them to
have any effect on the transaction. This is to avoid misunderstandings.
The book is structured by grouping content-related terms into chapters and, where
possible, has also been presented in a logical sequence. Where we use new
technical terms in an explanation, we explain them in a subsequent section. You
therefore do not need to browse through the entire book to gain an understanding.
If you wish to look up a term quickly, please refer to the alphabetical index at the
back of the book.
In this second, fully revised edition of this book, we have added a number of new
terms, most of which are related to capital markets (the stock exchange) and
updated a number of terms.
This book was made possible through the efforts of many people. In particular:
Yann Dekeyser, Stijn Potargent,Wouter Caers, Jorn De Neve, Koen Fierens, Luc
Heynderickx, Peter Lauwers, Wouter Lauwers and Rosy Rymen.
Finally, I would like to thank the marketing department of the KPMG network in
Belgium and publisher Wolters Kluwer for their suggestions on writing style and
language usage and their support with the layout.
Additional comments and suggestions are always welcome, and can be sent to
info@kpmg.be.
KPMG Advisory
About KPMG M&A Services

KPMG M&A services are provided by
independent member firms affiliated with the
KPMG network. In Belgium these are KPMG
Advisory burg. cvba and KPMG Tax & Legal
Advisers burg. cvba.
Each day, more than 5,000 professionals within the
KPMG network, in 48 countries around the world,
provide advice on mergers, acquisitions, divestments,
joint ventures and strategic alliances. They assist
clients throughout the entire transaction, from the
strategic evaluation to the completion of the transaction
and the final integration or divestment.
Table of contents

Forward
1
1. Agreements 5
1.1 Agreements in General
1.2 Guarantee provisions in the agreemen
6
8
2. Deal structuring
13
3. Price 19
4. Transaction process viewed from the perspective of the buyer 27
5. Transaction process viewed from the perspective of the seller 33
6. Advisors 37
7. Valuation
41
8. Buy-out
47
8.1 Perspective of the fund
8.2 Debt financing
48
52
9. Growth capital
10. Operational elements of the deal
11. Capital markets

Index
57
61
65
71
Agreements
1.1 AGREEMENTS IN GENERAL

An agreement on the sale of a company involves exchanging a large
number of documents. We have listed the most commonly used below, in
an order that attempts to reflect chronology to some degree.
> NDA / Non Disclosure Agreement: an undertaking to ensure secrecy. In
this agreement, the parties confirm that they will not misuse the information
exchanged in the context of merger talks. An NDA also often includes other
provisions, such as an agreement not to poach staff during the negotiations.
> Offer Letter: a letter indicating the intention to purchase, which is often of a nonbinding character ( see also Non-binding/binding).
> Exclusivity: a clause in a letter or an agreement in which the seller states that
it is not negotiating with any other parties and will not begin or enter into any
such negotiations. Exclusivity is for a limited
time period.
> LOI / Letter Of Intent: a declaration of intent.
This term is used for the first written document
setting out the intentions of the parties.
Generally, it is nothing more than an intention
to continue negotiating subject to only two
binding clauses (i.e. exclusivity and secrecy).
An LOI often contains

both binding and
non-binding clauses.
> MOU / Memorandum Of Understanding: a statement in principle (

also LOI). In practice, these terms are often used interchangeably.
In addition to clauses concerning secrecy,

an NDA often also contains other clauses.
see
> (Non) Binding: the binding character of clauses or the entire agreement is a
matter that requires particular attention when preparing documentation to be
exchanged by the parties. Non-binding statements are often chosen at an early
stage and changed into more binding statements/documents as the sale process
progresses.
> MAC / Material Adverse Change: the lack of any fundamental change of
circumstances (MAC) affecting the company is a very common condition for
converting an LOI into a binding SPA. In practice, the proper definition of the
MAC is often part of the discussions. Often, reference is made to maintaining
profitability, not losing important customers, maintaining licenses, and similar
matters.
> SPA / Share Purchase Agreement: an SPA is the final agreement between
the buyer and the seller on the sale of the company, subject to a number of CPs
(condition precedents).
> Heads of Agreement: an agreement in principle ( see also LOI and
MOU). In practice, these terms are often used interchangeably. This term also
refers to a binding list of basic elements that will be covered in more detail in a
Share Purchase Agreement (SPA).
> CP / Condition Precedent: a CP is a condition for concluding the agreement.
Legally speaking, this can have the character of both a condition subsequent and
a condition precedent. A typical example of a CP is obtaining approval for the
acquisition from the competition authorities.
> Anti-Trust Filing: the notification of the acquisition to the competition
authorities.
> Closing agreement: the document setting out
the final settlement of the agreement after the
CPs have been met. This document results in the
transfer of ownership and the payment taking
place.
Approval from
competition
authorities is a
common CP
1.2 GUARANTEE PROVISIONS IN THE AGREEMENT

The guarantee provisions in the agreement are an important part of the
negotiations. As the buyer receives only very limited statutory guarantees
when buying shares, the agreement will often provide explicit extensive
guarantees. A number of very commonly used terms are presented below.
> Representations: statements. In the event that statements made by the seller
about the company prove to be incorrect, these statements, either together with
the warranties or otherwise, form the basis for subsequent indemnities.
> Warranties: guarantees or general safeguards. The seller not only provides
statements, but also guarantees that these statements are correct. The
warranties may be time-limited and limited up to a certain amount of money.
> Indemnities: compensation for damages.
These are stipulated on top of the general
safeguards ( see warranties) for a number
of additional elements. Indemnities are used
if it is known that a particular problem exists
or could occur, for example if the cost of
decontaminating the plot of land located at x
is borne by y.
General warranties and

specific indemnities
supplement each other
> Guarantees: in order to assure the

buyer that the seller will fulfill its obligations, the seller may provide certain
financial guarantees. This is the case if a claim is submitted on the basis of the
representations and warranties or the indemnities. These guarantee stipulations
are also valid for a specific period of time and may be limited to a specific amount
of money. The most commonly used types of guarantee are the bank guarantee
(upon first request or otherwise) and escrow.
> Escrow: an amount deposited in a frozen bank account to guarantee that any
losses will be compensated.
> Bank guarantee: a guarantee issued by a bank
to ensure that any losses will be compensated.
If the seller does not pay the claim, it will be paid
by the bank, instead of the seller, once certain
conditions have been met, after which the bank
demands repayment of the claim. Banks charge
a fee for issuing this guarantee.
An escrow may be
replaced by a bank
guarantee
> Disclosures: notifications. This is a list of elements that the seller discloses
to the buyer with the aim of avoiding subsequent disagreement as to whether
certain information has or has not been divulged during the negotiations. It is
important in this context to properly record whether these disclosures have an
effect on the warranties or indemnities. If, for example, the seller discloses that
soil has been polluted, this might prevent the buyer from making a claim for the
pollution.
> Threshold: frequently, parties agree only to submit claims if the total amount
of the claims exceeds a specific minimum amount. Two systems can then be
linked to this, specifically the basket and the threshold sum. Of course, hybrid
systems may also be agreed on.
> Basket: basket. Once the threshold has been reached, the loss will be
compensated in full.
Classical point of contention during negotiations: does the entire

data room ( see page 28) constitute a disclosure?
> Franchise: once the threshold has been reached, the amount of the loss in
excess of the threshold will be compensated. This means that the threshold is
similar to the franchise In an insurance policy.
> De minimis: a minimum amount for individual claims is often specified as
a claim or a combination of claims. It only counts towards the threshold if it is
equal to or greater than a specific amount.
10
Tax
Deal structuring
ce
Legal
Fin
an
1.Overeenkomsten
Overeenkomsten
In the case of the acquisition of a group of businesses and companies, it is

important to properly assess the order in which companies or assets are
acquired by existing companies or newly created companies. This analysis,
which is called deal structuring, seeks to combine tax optimization with a
healthy financial structure and legal simplicity and clarity.
> Asset deal: an agreement in which the assets, not the shares of a company
are sold. This has three special consequences. First, most of the debts, including
the majority of hidden debts, remain
behind in the selling company.
Second, this agreement undergoes
a different tax treatment ( see
also tax treatment). Third, there
There are major differences
are consequences for the legal
between an asset deal and a
continuity of the activities of the
share deal when it comes to
company.
taxation.
> Share deal: an agreement under

which the shares of the company are sold (
see also asset deal).
> Tax treatment: usually, gains on shares are not taxable and the sale of shares
(a share deal) may be preferred by the seller. On the other hand, the buyer may
prefer an asset deal for tax purposes because the goodwill paid ( see chapter
on Valuation - Goodwill) may be tax-deductible, which, in principle, is not the case
with a share deal.
> Legal continuity: this term refers to the question whether the companys
existing contracts with customers, suppliers, staff, and authorities (including
licenses), etc., are to be retained after the acquisition. In a share deal, the shares
of the company are sold, which only rarely has an effect on the agreements
An asset deal can include restrictions, such

as not being able to transfer licenses
14
that the company has entered into ( see also Change of Control Clauses).
In an asset deal, there is basically no legal continuity and all of the companys
agreements with customers, suppliers, etc., must be entered into again, or
at least be formally continued by the acquiring entity. With regard to legal
continuity, we will look at two matters: the branch, and TUPE.
> Branch of business: line of business. Under certain conditions of company
law (acquisition of a line of business), an asset deal can be made with legal
continuity.
> TUPE / Transfer of Undertakings (Protection of Employment): according to
European and Belgian social law, in many cases there is a mandatory transfer
of employment contracts, even if there is no legal continuity for the company
itself. Reference to this situation is made in a European context in TUPE, and in
Belgium in CAO 32bis (section 32b of a collective bargaining agreement).
> Change of Control Clauses: clauses in agreements concluded by the
company (e.g. for a loan from a bank), that stipulate that the contract will no
longer be valid or will be dissolved if there is a change in control of the company.
Identification of the Change of Control Clauses is an important part of the
analysis of the legal continuity of the acquisition.
European TUPE regulations protect staff in an

acquisition under an asset deal.
> Debt pushdown: an exercise in which the acquisition debt is pushed own
to the operating companies. Banks and other lenders prefer to provide funding to
companies that generate the operating cash flow, particularly if the acquisition of
shares is done through a holding company that has no operating activities itself.
This is often the case in private equity deals.
15
> Leakage: when setting up an acquisition financing structure involving several

national and/or international companies, it is important to ensure that the intragroup distribution of the profits, or the repayment of loans, results in a minimum
of taxes (thus value) leaking by means of unrecoverable withholding taxes
(taxation at source) or dividend taxes, for example.
> Financial assistance: this term refers to Section 629 of the Belgian Company
Code, which states: A public limited company cannot advance any funds, nor
permit loans or provide security with a view to the acquiring of its shares or
profit-sharing certificates by third parties. This ban was lifted as of 1 January
2009, and financial aid or financial assistance is now possible under certain
conditions.
16
Price
3
10 million
1.Overeenkomsten
Overeenkomsten
In view of the fact that a company is not only a complex body of activities,
but also of assets and debts, various types of arrangements are agreed on
to fix the price. This chapter contains a number of common terms that are
used in discussions about pricing.
A locked box is not recommended in situations

where there is limited opportunity for due diligence
and in complex carve-out situations
A classic price formulation in a contract consists of a price for the activities of

the company assuming normal working capital, minus the debts of the company,
plus the cash present in the company.
Schematically, we can
present this as follows:
Debt free/cash free price
Minus debt
Plus cash
Minus/plus difference
between existing working
capital and normalized
working capital
20
The analytical methods used during the due

diligence ( see chapter 4) examine in detail
each parameter that can have an effect on
the valuation at the time of the contractual
conclusion of the operation (the closing date).
The movements in working capital before
the acquisition will receive the buyers full
attention. This is because the buyer wants
to ascertain whether the receivables, the
inventory and suppliers will be in line with
those of a normal business operation at
the time of the acquisition. The buyer will
therefore want assurance that the receivables
will not be abnormally quickly converted
into cash due to pressure being placed on
customers. In addition, the buyer will want to
deter the seller from liquidating the inventory of the company to generate cash,
thus leaving behind a company that cannot meet customer demand. Finally, the
buyer will want to deter the seller from building up delays in the payment of
suppliers in order to accumulate cash on the closing date.
A simple example
We will take as our example a taxi company with five taxis. On the
basis of a debt-free situation and half-full fuel tanks, you determine
how much you want to pay for the taxis and the customer base. At
the time of acquisition (the date of the closing accounts) you take an
inventory. You notice that there are some car loans that need to be
repaid, the fuel tanks are empty and there are still envelopes in the
taxis containing cash for buying fuel. The final price will ultimately
amount to the price payable for the business activity, minus the loan
and the fuel shortage in the tanks, plus the cash found in the taxis.
.
> Debt & cash free: the price assuming a situation without financial debts and
without cash free.
> Working capital: the sum of the customers, suppliers, inventories and other
current assets and liabilities necessary for the day-to-day operation of the
company.
> Normalized working capital: an analysis of how the working capital would
look in normal circumstances. This involves adjusting for all exceptional and
non-recurring items, such as the collapse of a major customer, a major supplier
position due to the purchase of a machine, or a large inventory position due to a
machine breakdown.
21
> Target working capital: the state of the working capital to be used as a basis
for settlement at the time of the closing. The target working capital is recorded
in a contract during the negotiations and is often based on a historical analysis
of the working capital requirements of the business. The settlement is based on
the closing accounts, with the price being increased or reduced if the company
has more or less working capital than the target capital on the date of the
closing accounts.
> Closing accounts: when the agreement is recorded in an SPA, a future date
on which a balance sheet is to be drawn up (the closing accounts) is agreed.
These closing accounts will then form the basis for determining the net debt and
the working capital that will be used for determining the final price according to
the agreed price formula.
> Net debt: there is no official definition of net debt, which means it is important
to define it properly in the LOI and SPA. The net debt generally comprises
financial liabilities (in a broad sense) minus cash. Financial liabilities include the
following: loans and associated liabilities (including interest that is current but
not yet payable), bills of exchange, repayable subsidies, pensions and other longterm commitments to staff, commissions giving rise to cash outflows within
the foreseeable future, off-balance sheet commitments that can be considered
equivalent to debt, and certain leasing debts.
> Belgian GAAP / Belgian Generally Accepted Accounting Principles: the
generally accepted accounting principles in Belgium. This term refers to Belgian
accounting law and accounting principles applicable in Belgium. If the SPA
includes a pricing mechanism based on the closing accounts, it is important to
specify under which GAAP these closing accounts must be drawn up. This could
be under Belgian GAAP, or under Dutch GAAP, US GAAP, Swedish GAAP, etc., or
alternatively under IFRS.
> IFRS / International Financial Reporting Standards: this is an international
GAAP used for reporting purposes by listed companies in Belgium and the EU.
> Earn-out: if there is a major price discussion between the buyer and seller
due to differing views on the future results of the company, an earn-out may
22
provide a solution. It makes the final price partly

dependent on the future achievement of certain
objectives. However, it is essential to be vigilant.
In addition to subsequent discussions on the
measurement of the results on which the earn-out
is based, an earn-out can also obstruct the efficient
integration of the company. This is because the earn-out clause requires
that the results after the acquisition are compared with the performance
objectives recorded before the acquisition. The full integration of the company
with the acquirer, and thus achieving synergies, can make the interpretation of
any differences more complex.
An earn-out can
make integration
difficult.
> Spread payment / vendor note / vendor loan: if the seller allows spread
payments, it implicitly grants a loan (vendor note or vendor loan) to the buyer.
> Locked box: a locked box mechanism is a price mechanism in which the price
of the shares is determined on the basis of a historical accounting situation,
rather than a future situation (closing accounts). The price is determined as a
Example
In the example of the taxi company (see page 20) the fuel payments
made using the cash in the envelopes will reduce the cash but will
also increase the contents of the fuel tanks, and thus have a neutral
effect on the value of the company.
debt and cash free price, minus historical debt, plus cash, and adjusted for the
working capital surplus or shortfall at that same historical time. In addition, it is
contractually agreed that there cannot be any cash flowing out of the company
(the locked box) in the form of the payment of dividends or management fees.
All other cash movements remain within the company and are thus assumed to
have no effect on value. This method can only be applied if the buyer can obtain
a very good picture of the balance sheet of the company during the acquisition
process.
23
Classic mechanism
Period covered by the

historical financial statements
Closing accounts to crystallize

the situation near the time of
closing and to adjust the price
closing accounts
Dec 2013 Jan 2014
Feb
Ownership and control

Mar
Apr
May
Jun
Jul
The locked box mechanism

No closing
accounts

historical financial statements
Dec 2013 Jan 2014
Ownership and control

Feb
Mar
Apr
May
Jun
Jul
In a locked box system, the period between the last available balance sheet and the
closing date is not covered by closing accounts but a contractual agreement that no
capital can flow out of the company.
24
Transaction
process viewed
from the
perspective of
the buyer
1.Overeenkomsten
Overeenkomsten
Viewed from the perspective of the buyer, the sales process involves,
among other things, the buyer wanting to form a good picture of the
company it is buying, in the area of both risks and opportunities. This
investigation, which is often called auditing the books, or due diligence,
includes many elements that each form a separate element of the due
diligence process. We summarize the most common elements below.
> Financial due diligence: the review of the historical and future figures of
the company. The focus in this context is often on the quality of earnings (how
robust are the historical results?), the quality of net debt (which items could all
be taken into consideration in determining the net financial debt?
see also
debt and cash free, the forecast (analysis of the budgets and future projections)
and the normalized working capital.
> Tax due diligence: the investigation of the historical and future tax situation
and exposure of the company or companies in the areas of both direct and
indirect taxes.
> Legal due diligence: the review of the legal situation of the company in the
areas of company law, review of contracts, labor laws, intellectual property (IP),
permits, etc.
> Commercial due diligence: the review of the markets in which the company
operates and the commercial position in which the company finds itself.
> Pensions due diligence: the review of the existing and future obligations
related to pensions. The future commitments can vary based on the type of
pension plan set up by the company.
> Defined contribution plan: a pension plan
in which the final amount is not fixed, but will
be the sum of the contributions and the return
achieved. In this context, the company does
not give the employee a guarantee of what the
28
How far do you go

in your due
diligence?
Is the past a good mirror for

the future?
final amount will be. However, for the members, the law protects the return on
accrued reserves by imposing a minimum return.
> Defined benefit pension plan: a pension plan in which the final amount to be
obtained is contractually fixed. In an acquisition with this type of pension plan
there is often discussion about the size of the existing pension debt. Specialized
pension actuaries are therefore consulted to analyze these types of plans and to
work out how the pension provision and the accrued specific investments relate
to the pension debt.
> Insurance due diligence: the investigation into the existing insurance
coverage and variance analysis with the required coverage, as well as the
investigation into the continuity of insurance coverage during the transaction
process.
> Operations and synergy due diligence: the investigation into the efficiency
of the operations and how specific synergies can be achieved.
> Environmental due diligence: the investigation into the environmental
situation in relation to soil pollution, water pollution, air pollution and noise
pollution.
> Health and safety: the
investigation into working
conditions with a focus on health
and safety.
> Release/reliance (for
financiers): due diligence reports
prepared by advisors are used by
the acquiror and also by parties
The existence of defined benefit

pension plans often makes
a transaction more complex,
depending on the type of pension
plan (defined contribution or
defined benefit).
29
involved in financing the acquisition. It is usual, for example, for financing banks
to have access to the reports following the exchange of a letter in which the
responsibilities are defined. Broadly speaking, there are two types of access:
simple release, in which the advisors do not have any specific accountability
to the banks, and reliance, in which the advisors have a similar duty of care
(accountability) to the banks as they do to the buyer.
> Hold harmless letter / approved reader letter: letter of indemnity. A letter in
which an adviser provides a party with access to a report or a file, in which this
party agrees to indemnify the advisor from any liability that could arise from the
access provided to files or reports.
> Clean team: a clean team exists when an advisor is asked by both the selling
and the buying parties to review a very specific topic that contains sensitive
information, such as the customer portfolio. The clean team receives all the
information, but only provides a summarized analysis to its clients (the buyer and
the seller together). The parties could agree that, for example, the sale will not
proceed if one of the top five customers disappears. If the seller would rather
not disclose the identity of the customer, a clean team scenario could offer a
way out, since the clean team can analyze the customers and report on them on
an anonymous basis.
> Data room: the room or space (may also be an electronic space,
see also
E-data room) in which specific data concerning the company are collected. By
providing the buyer (and its advisors) with access to this space, the buyer will
have the opportunity to read these documents and to form a picture of the
company. Visits to a data room are governed by data room rules.
> Data room rules: a set of rules that the visitor must first accept, laying down
whether the visitor is to be given access to the data room, at what time, for how
long, and what may happen to the information contained in it (e.g. whether or
not copies can be made).
> E-data room: electronic data room. Web-based applications make it
possible to organize data rooms in a way that allows them to be consulted
online (in a protected form) once all the documents have been scanned.
30
E-data rooms have the advantage of being easy to use and of being accessible
24 hours a day by an international team of specialists without any need for
travel.
31
Transaction process
viewed from the
perspective of
the seller
If we look at the sales process from the perspective of the seller, we find a
sequence of process steps involving a long list of candidates from which a
short list is selected. These are sent a teaser and (after signing an NDA) also
an information memorandum and a process letter. On the basis of the offer
letters received, the decision is made as to who is to be given access to the
data room and, potentially, to the VDD (Vendor Due Diligence) report. The
terms below are therefore shown in chronological order insofar as possible.
> Long list: the initial long list of potential buyers for the company.
> Short list: the short list of companies that will be contacted in an initial phase
to gauge their interest. The short list is often created after making a selection
from the long list.
> Teaser / blind profile: the anonymous profile of the company that is sent to
potential buyers. The aim is to determine whether such a purchase could interest
them without the identity of the company being disclosed.
> Info Memo / Information Memorandum: information memorandum. After
signing an NDA, the potential buyer may be sent an information memorandum
and a process letter. The information memorandum is a document that describes
the company and, in addition to a good summary, includes the following
information: history of the company, description of products and services,
market position, management, financial information, etc.
> Process letter: the process letter contains information on how the seller
wants to organize the sales process, by which date a bid is expected and what
requirements it must meet and how the next phase will look after that bid.
Making a teaser is often a difficult balancing act between

preserving anonymity and providing sufficient information
34
> VDD / Vendor (initiated) Due Diligence: a due diligence investigation

conducted by an independent party, often an audit firm or law firm, with which
the initial client is the seller. After the closing of the transaction, the provider of
the due diligence is accountable to the buyer.
The seller is the initial client of a vendor due

diligence, the buyer will be the final client
35
Advisors
1.Overeenkomsten
Overeenkomsten
In a transaction, various advisors provide guidance to their clients and

provide a number of services. We can identify the following classic roles
and fees.
> Deal advisor: the advisor (often an investment bank or corporate finance
house), actingas a broker, which means that it looks for the parties and brings
them together, conducts and organizes negotiations and draws up the various
non-judicial sales documents (see also teaser, info memo and process letter).
> Due diligence provider: specialized suppliers of due diligence assistance,
often specialized departments of law firms or audit firms (
see also due
diligence).
> Lawyer / M&A lawyer: the specialized lawyers or corporate lawyers who
write the contracts and negotiate (
see also Chapter 1: Agreements).
> Specialist advisors: subject specialists are called upon during transactions to
provide specific advice on the environment, pensions, taxes, etc.
> Auditor: an auditor is often asked to issue a report on the closing accounts
(
see page 21).
> List of parties: a list of parties is drawn up in order to obtain a clear overview
of the advisors and members of the management of the buying and selling
parties. The list records the contact details of the various people involved in the
transaction.
An M&A team usually consists of a combination

of people from within the company and external
advisors
38
> Fees: the fee of the deal advisor generally consists of two parts, specifically
the retainer and the success fee. The fees of other advisors are usually time and
expense based.
> Success fee: the portion of the fee that depends on the closing of the
transaction.
> Retainer fee: the fixed or monthly payment that is awarded regardless of
whether the transaction is completed.
> Time and expense based fee: fee based on hours worked and reimbursement
of expenses incurred.
Is the fee structure of the advisor in line with

the interests of the client?
39
Valuation
1.Overeenkomsten
Overeenkomsten
Many specific techniques and methodologies are used to determine

the value of a company. These are described very extensively in the
professional literature. It is not our aim here to give a description of the
methodology as well, although some frequently used terms are described.
REBITDAR REBITDA EBITDA EBIT EBT ...?
> Goodwill: the difference between the price paid for the shares and the book
value of the equity of the company.
> EBITDA / Earnings Before Interest, Tax, Depreciation and Amortization: the
profit before interest, taxes, depreciation and amortization. This is a gauge of the
operating cash flow of a company.
> REBITDA / Recurring Earnings Before Interest, Tax, Depreciation and
Amortization: the recurring profit before interest, taxes, depreciation and
amortization. This is a gauge of the recurring operating cash flow of a company,
and is the EBITDA adjusted for non-recurring items. Typical adjustments relate to
the effect of a restructuring or a large one-off order or contract.
> EBITDAR / Earnings Before Interest, Tax, Depreciation, Amortization and
Rent: the profit before interest, taxes, depreciation, amortization, and rent. This
is a gauge of the operating cash flow of a company before the payment of rent.
Assets can be financed in different ways (renting, operating leases, finance
leases, sale with loan, etc.) Since rent affects EBITDA whereas a sale with a loan
The interpretation of results and the evaluation of the

parameters used, not the calculation, appears to be
the most difficult aspect of valuation
42
does not, EBITDAR is a concept that is used so that the results can be analyzed
and compared independently of how the assets are financed.
> Free Cash Flow: deducting the tax on the operating profit, investments and
growth in working capital from the EBITDA provides an indication of the free
cash flow.
> PBT / Profit Before Tax: the profit before taxes, sometimes also described as
EBT/earnings before tax.
> PAT / Profit After Tax: the profit after taxes.
> EBIT / Earnings Before Interest and Tax: the profit before interest and taxes.
This is also called operating profit or operating profit before tax.
> NOPAT / Normalized Operating Profit After Tax: the normalized operating
profit after taxes. This is the operating profit after taxes, which is normalized by
eliminating all extraordinary and non-recurring items.
> DCF(F) / Discounted Cash Flow (to the Firm): a commonly used valuation
method based on an actualization of future free cash flows. The future free cash
flows are estimated on the basis of a forecast and then actualized to the current
date by using an actualization rate or discount factor known as the WACC.
> WACC / Weighted Average Cost of Capital: the weighted average cost of
capital. The WACC is calculated by taking the weighted average of the cost
of the capital and the cost of the debt (cost of equity and cost of debt). The
weighting factor is the ratio of financing from the companys own funds (capital)
to financing from borrowed funds (loans - debt).
> Cost of debt: the cost of financing debt after deduction of the tax benefit
owing to the tax deductibility of interest amounts.
> CoE / Cost of Equity: the cost of capital, determined by equating it to the
required return that average investors want to achieve on their investments, on
the basis of the companys risk profile. A classic way to determine the CoE is by
applying the CAPM.
43
CoE = RF + Beta x MRP + Alpha

> CAPM / Capital Asset Pricing Model: the model for approximating the CoE,
which is based on the assumption that an investor will require a return that is at
least equal to the return on a risk-free investment, plus an adjusted premium to
compensate for the risk that investments are made in equity and a premium for
other specific risks associated with the investment. The formula is as follows:
CoE = RF + Beta x MRP + Alpha
> RF / Risk Free Rate: the return on a risk-free investment. A long-term
investment in government bonds is often used as a reference for this.
> MRP / Market Risk Premium: market risk premium. A premium that an
investor requires on top of the risk-free rate as compensation for the fact the
investment is in shares. It is generally assumed that this premium amounts to
approximately 5%.
> Beta (levered/unlevered): the beta is the adjustment factor that we apply to
the MRP. The beta adjusts the MRP for two risk factors. The first is for the sector
in which the company operates, because, for example, a biotech company is not
comparable to a real estate company in terms of risk profile. The second is for
the debt level of the company, because it is assumed that a company with more
debts runs more risks than a company with less debts. The beta that contains
the adjustment factor for the debt level is called the levered beta, whereas the
beta not containing this adjustment factor is the unlevered beta.
> Alpha: the risk premium that is added to the CoE because of specific risks
associated with the company. The most common example of this is the small
firm premium. This is a risk premium that is added because a small company is
subject to more risks than a large company.
> Multiple: the multiple method or market method is a valuation method that
is often used to support the results of a DCF(F) method. In this method, the
company is compared with other companies whose value is known. This is
done using a multiple. Sector peers, for example, are valued at 6 times EBITDA.
44
Two methods can be applied to discover the value of comparable companies,

specifically CoCo and CoTrans.
> CoCo / Comparable Company: if a comparable company is listed on a stock
exchange, we can determine the market capitalization of the company based on
the share price multiplied by the number of shares.
> CoTrans / Comparable Transaction: if a comparable company has recently
been sold, we can take the transaction price (if known) as a measure of the
value.
> EV / Enterprise Value: this is the debt and cash free value of a company. Both
the DCF(F) method and many multiples initially result in an EV, which must be
adjusted for the cash and debts. Only then is it possible to arrive at a value of the
shares.
> Discount / Premium: adjustments are still applied to the value of shares if the
transaction relates to a minority interest, a majority interest, a holding company
through which ownership is acquired indirectly, or shares without voting rights,
etc.
Studies of the level of the historical market risk premium

going back to before the First World War are available.
45
Buy-out
1.Overeenkomsten
Overeenkomsten
Given the sharp growth in the activity of investment funds, it essential to

have a separate chapter on the sometimes very specific use of language in
the investment fund world. For clarity, we have made a distinction between
the terms associated with funds and the capital side of the investment and
the terms associated with debt financing.
8.1 PERSPECTIVE OF THE FUND
In a buy-out, the management often also invests

on more favorable terms than the fund.
> Business Angels: investors who invest in a company at a very early stage. This
type of investor is often an individual or a small group of individuals.
> Venture Capital: this term is used for all investment funds. However, to
make a clear distinction between investment funds active in start-ups or
technologically uncertain companies and investment funds active in mature cash
flow generating companies, the term venture capital is being used to indicate the
first type of investment funds to an increasing extent. Buy-out funds and private
equity relate to the second type of investment funds.
The remuneration of the fund management usually consists

of a management fee plus a fee related to the return
achieved by the fund, which is known as carried interest
48
> Private Equity (PE) fund: an investment fund active in mature cash flow
generating companies that also attracts debt financing for the acquisitions and
actively involves management in the acquisition.
> Buy-out fund:
see also private equity.
> Hedge funds: funds that, unlike PE funds, also invest in assets other than
shares.
> Vulture funds: funds that are specialized in acquiring distressed companies.
> Special situation funds: in view of the negative connotations associated
with the reference to vultures in the term vulture fund, these funds refer to
themselves more neutrally as special situations funds.
see also vulture fund or special situations fund. This
> Turn-around funds:
name places the emphasis on the value created by restructuring the acquired
companies and making them profitable again (i.e. turning them around)
> MBO / Management Buy-out: a transaction in which the existing
management and an investment fund become co-owners of a company.
> MBI / Management Buy-in: a transaction in which a new management group
and an investment fund become co-owners of a company.
> LBO / Leveraged Buy-out: a buy-out partly financed with debt.
> Sweet Equity: to encourage management and bring its interests into line with
those of the investment fund, management is given the opportunity to invest
in the target company under special conditions. In this context, the relative
contribution per share is often lower for management than the amount paid by
the investment fund. The ratio of the effective price paid by management to the
price paid by the investment fund for their respective investments is sometimes
also called the envy ratio.
49
> Ratchets: ratchets are systems that are used to determine and change the
ratios of the shareholdings between different groups of shareholders. A ratchet
can make it possible, for example, for management to increase its share in the
equity of a company if the company performs well. On the other hand, ratchets
can be used to ensure that the investment fund achieves a maximum return if
the company does not perform well.
> LP / Limited Partnership: Anglo-Saxon funds are often set up as tax
transparent limited partnerships with limited liability for the investors (the
limited partners). These limited partnerships are often offshore partnerships for
maximum legal flexibility.
> GP / General Partner: in order to maintain the limitations in liability as a
limited partnership, a fund must also have a general partner who has unlimited
liability. The general partner is associated with the management company of the
investment fund.
> Investment horizon: the period for which the fund intends to invest. There are
two types of funds in terms of horizon: open-end and closed-end.
> Closed-end fund: a fund with a limited investment horizon. Often, a few years
will be allocated for investing: several years for the growth of the company, and
several years for its sale. Closed-end funds seek to complete this entire cycle in
6-12 years.
> Open-end fund: a fund without a specific investment horizon.
> Co-investment: an investor who also invests in a specific buy-out alongside
the investment fund, in principle under the same conditions as the investment
fund.
> Carried interest: the management of a PE fund is usually paid a management
fee and a percentage of the added value that the fund realizes for its investors.
The percentage is usually paid after the investors have realized a specific return
(
see also Hurdle). The funds share in the return is called the carried interest.
50
The exit is already considered at the time

the investment is made.
> Hurdle: the return that a fund must realize for its investors before the
management of the investment fund can share in the added value of the fund.
> Committed capital: the total amount that investors commit to the fund in
order for it to make investments during a specific period.
> Drawdown: once a fund has decided to proceed with an investment, the
investors are called upon to make the necessary money available. The drawdown
refers to the actual provision of money already been promised to the fund
(committed capital).
> Distribution: the payment of the returns achieved by the fund to the investors.
> Exit: when a fund steps down as an investor, this is referred to as exiting. At
the time of its investment in a company, the PE fund already considers how it
could sell back its shares in the company.
> Secondary buy-out: if one PE fund sells its investment to another PE fund,
this is known as a secondary buy-out.
> Club deals: an agreement in which various funds pool money with a view to
an investment that would not be possible on an individual basis because of the
amount involved or specific investment restrictions.
51
8.2 DEBT FINANCING

For a leveraged buy-out, debt financing is required in addition to a private
equity component. The debt financing of an acquisition is also a good
source of specific jargon used by bankers, investors and their advisors.
> Leverage: the degree of debt financing used for an acquisition.
> Acquisition finance: a specific term used for the debt financing of the
acquisition of a company.
> Stapled / debt package: a package of loans in various forms and with different
degrees of subordination, ranging from mezzanine to junior and senior debt.
> Mezzanine: an intermediate form of financing that has some of the
characteristics of capital and some of the characteristics of debt. This can
technically take the form of convertible debt, preferred shares or debt with
warrants.
> Junior debt and senior debt: a subordinated loan that is lower (junior)
or higher (senior) in priority, where the subordination refers to the order of
repayment in the event of the companys bankruptcy.
> PIK / Payment in Kind: fixed-income securities that generate interest in the
form of additional debt instead of a sum of money. The final interest is only
payable on the final maturity date.
Mezzanine exists in many forms. It is important to

analyze the instrument properly and understand
what happens in which situation.
52
For a leveraged buy-out, debt financing is required in addition to a

private equity component. The debt financing of an acquisition is
also a good source of specific jargon used by bankers, investors
and their advisors.
> Bulletloan: a form of debt in which the interest payment and the debt
redemption take place in full at the end of the loan.
> Grace period: the period during which no interest payments and/or debt
repayments need to take place.
> Debt syndication: if several banks underwrite the debt financing, they can
form a syndicate and as a result act jointly.
> Headroom: this term is sometimes used to refer to the difference between
the current performance of the company and the covenants.
> Covenants: the parameters used by banks to assess whether repayment is
threatened.
> Breach: if a covenant is not met and therefore a breach of covenant occurs, the
loan agreements may stipulate that the debt is immediately due and payable or
repayable.
> Euribor / Euro Interbank Offered Rate: This is a reference interest rate often
used as the basis for a variable interest rate.
> Basis points: hundredths of one percent of interest. The interest on a loan is
often expressed as EURIBOR plus a number of basis points.
> Hedging of interest risk: derivative financial instruments, such as interest rate
swaps, are used to convert a variable interest rate into a fixed interest rate.
53
> Crowdfunding: the funding of a project or company by a group of individuals

rather than professional institutions, in which the internet is used as the main
means of communication. On some crowd funding websites, the invested
money does not go directly into the project; the entrepreneur only receives the
money when 100% (or more) of the foreseen investment has been placed. If
this 100% is not achieved, the investors get their money back.
> FFF: Family, Friends and Fools. Financing form for young start-ups by means
of loans (subordinated or otherwise) from friends, acquaintances, or family
members.mille.
54
Growth capital
1.Overeenkomsten
Overeenkomsten
If an investor increases the capital in a company in order to support growth

and in return receives a portion of the shares, this is called growth capital.
This situation can occur at companies at various stages of maturity, ranging
from start-ups to companies that are preparing for a subsequent stage in
their growth.
> Pre-money value: the value of the company excluding the value of the cash
paid when the capital is increased.
> Post-money value: the value of the company including the value of the cash
paid when the capital is increased. This value usually serves as a reference for
allocating shares.
> Shareholder agreement: an agreement in which the various shareholders
make agreements concerning matters such as voting rights at general meeting
and rights and obligations related to
the sale of packages of shares.
> Drag along: an obligation included
in the sharekholder agreement to sell
the shares if the other party also sells
its package of shares.
The drag along and tag along

arrange what happens if one
shareholder wants to sell.
> Tag along: a right included in the

shareholder agreement to sell the shares if the other party also sells its package
of shares. In contrast to drag along, this does not involve an obligation but
merely a right.
An example
Where the pre-money value is 100 and the capital increase is 50, the
post-money value is 100+50 = 150.
This post-money value is usually used as a reference for the calculation of the share ratio. In that case, the subscriber to the capital
increase specifically has the right to 50/150 or 33% of the shares.
58
> Blocking minority: the articles of incorporation of a company or company law

may provide that a special majority, e.g. 75%, is required at the general meeting
to make important decisions. This means that a minority shareholder who owns
25% plus one share could block such decisions at the general meeting.
> A-shares, B-shares: in order to be able to grant different rights to different
groups of shareholders (e.g. founders, growth finance providers, etc.), several
types of shares are often created. For example, the articles of incorporation
could stipulate that the holders of B shares have the right to appoint two of the
five directors.
> Board seat: providers of growth capital often demand the right to be
represented in the board of management. The number of board seats is then
included in the negotiations on the terms of the capital increase, as are the
majorities required for taking certain decisions.
> Autofinancing capacity: A growing company has a need for investments,
including in operating assets and working capital. To a certain extent, a company
can finance its growth from its own operating cash flow. The extent to which
this is possible is called auto-financing capacity. However, if the company wants
to grow faster than its auto-financing capacity permits, it must attract external
financing.
> Anti-dilution: a clause in the financing contract that offers a certain protection
to a new financier. This clause states that if the reference value for determining
the number of shares issued in exchange for the capital increase would be lower
in a subsequent round of capital funding than in the current round of capital
funding, the existing financiers will receive additional shares to prevent dilution
(see also ratchet).
Anti-dilution clauses often limit

the level of dilution
59
Operational
elements of
the deal
10
1.Overeenkomsten
Overeenkomsten
In addition to the technical aspects of the deal, it is important to keep an

eye on what happens after the acquisition. This section therefore includes
a number of terms that require an active approach if you want to do
something about the morning-after feeling.
> Strategy: when initiating and implementing a deal, the underlying strategic
goal should always be borne in mind.
> PMI / Post Merger Integration: the proper integration of the acquired
company into the existing buying company has to be set up, planned and
monitored. One of the tools often used for this purpose is the 100 day plan.
> 100 day plan: a detailed plan that specifies what must happen during
the first 100 days following the acquisition. It is generally assumed that the
foundation for a successful integration must be laid in 100 days.
> Synergy: the term used to describe the value created by the merger of
two companies. This value can be found both on the cost side (e.g. cheaper
purchases thanks to combined purchasing power and cheaper administration due
to not doubling up on financial management) and on the revenue side (e.g. by
selling the products of one company to the customers of the other company).
> Announcement: an important part of the 100 day plan is the announcement
of the acquisition. This includes notifying the press as well as communicating
the consequences and the changes that this will entail to stakeholders (staff,
customers, suppliers, etc.).
An active post-merger integration is a healthy

remedy for the morning-after feeling.
62
> Serial deal maker: a company that frequently makes acquisitions.

> Closing dinner: the traditional dinner at which the deal teams of the buyer,
seller, their advisors and financiers meet several weeks or months after the
transaction is completed.
M&A is only one way to fulfill a strategic goal

and is rarely an end in itself.
> Fat lady: during negotiations there are frequent warnings about premature
optimism about the success of the transaction. It isnt over until the fat lady
sings refers to the fact that the transaction is not complete until the final
agreement is signed.
> Tombstone: following the completion of the transaction, advisors or financiers
often have a Perspex trophy or, literally, a tombstone made to commemorate
the transaction. This tombstone is presented as a memento to the deal teams
and other advisors.
63
Capital markets
11
1.Overeenkomsten
Overeenkomsten
The term capital markets is often used to refer to everything involved in

trading shares, bonds and other long-term investments. In this context, the
financial markets (the stock exchange) are the means by which supply
and demand in various types of financial products are brought together.
> Bonds: bond loan: a marketable debt instrument for a loan entered into by
a government, a company or an institution as a source of financing. The buyer
of the bond receives an interest payment from the bond issuer in return for
furnishing the loan.
> Dilution: a decrease in the earnings per share due to an increase in the
number of shares over which the profit is distributed.
> Free float: the percentage of a companys shares that is freely tradable on the
stock exchange.
> Broker: a term for a stockbroker who buys and sells shares on a stock
exchange on behalf of clients.
> Greenshoe (of over-allotment option): option reserved for the selling
shareholders to increase the number of shares offered in an IPO by a fixed
amount in the event of oversubscription.
> IPO / Initial Public Offering: initial public
offering. In an IPO, or flotation, a company offers
its shares for sale on the stock exchange for the
first time. New shares are issued so that the
company can raise capital.
An IPO usually
induces a change in
corporate culture and
a new responsibility to
stakeholders.
> Long/short position: going long, or having

a long position, means taking a position in
securities to speculate on an increase in the
price of the securities. The opposite of going
long is going short, which involves speculating on a decrease in the price of the
securities. This is done by selling shares that are not already owned but which
hopefully can be bought more cheaply at a later date.
66
> Bookrunner: usually an investment bank that arranges the subscription,

allocation and after-market for securities in an issue of securities.
> Market cap: the market capitalization of a listed company, i.e. the total value
of its shares, calculated on the basis of the price of the shares on the exchange,
multiplied by the number of outstanding shares.
> Poison pill: a hostile takeover can be made more difficult by granting
additional rights to certain existing shareholders. These rights can mean that a
capital increase is reserved for friendly parties by certain existing shareholders.
The existence of a process of poison pill in the

statutes can affect stock prices.
> Hostile take-over: a hostile bid. A bid for a listed company whose current
board of management is against the takeover.
> Underwriter: usually an investment bank that manages and underwrites the
public issue of shares or bonds. As part of this, the bank promises to buy any
shares that are not placed on the stock exchange.
> Euronext Brussel: the exchange of Brussels. On 22 September 2002, the
exchange merged with the exchanges of Paris, Lisbon and Amsterdam to create
Euronext NV, the first pan-European exchange for shares and derivatives. Its
name was changed to Euronext Brussels at that time. On 4 April 2007, Euronext
N.V. merged with NYSE Group Inc. to create NYSE Euronext Inc.
67
> Institutional investor: an institution such as a pension fund or insurance

company that makes large investments and trades large quantities of securities,
often receiving preferential treatment and paying lower transaction commissions.
> Prospectus: a document required by law when issuing financial products (e.g.
shares, bonds, investment funds, etc.) which sets out the terms and conditions
of the issue.
> Lock-up arrangement: shares subject to a lock-up arrangement cannot be
traded before a certain date that is fixed at the time the relevant shares are
issued. When this period has expired, the shareholders can sell their shares.
> FSMA / Financial Services and Markets Authority: The FSMA, the successor
to the former Belgian Banking, Finance and Insurance Commission [Commissie
voor het Bank-, financie-en Assuratiewezen], is responsible for the supervision
of the financial markets and listed companies in Belgium, the approval and
supervision of certain categories of financial institutions, the monitoring of
compliance with rules of conduct by financial brokers and those marketing
investment products for the general public and the so-called social supervision of
supplementary pensions.
> Insider trading: prohibited trading with insider knowledge. This is the buying
or selling of shares by persons with access to information about the listed
company that is not publicly known.
> Fairness opinion: the additional opinion of an independent expert on the
value of a company or the assumptions used as a basis for the value. An expert
can assess whether the transaction terms and conditions, especially the price,
correspond with the underlying value of the company, and writes a report on
this.
> Private placement: in a private placement, the company raises capital by
selling shares privately to venture capital companies, private equity companies,
institutional investors and other investors, instead of holding a public offering of
shares.
68
> High-yield bonds: bonds issued by companies with a relatively low credit
rating or a high degree of risk. As the name indicates, these bonds have a
relatively high yield (return) because of the high risk. Also known as junk bonds.
> In the money: an option is in the money if the price of the underlying
security on the stock exchange is higher than the strike price in the case of a
call option (right to buy), or if the price of the underlying security on the stock
exchange is lower than the strike price in the case of a put option (right to sell).
> MTN / Medium Term Note: This is comparable to a bond, but usually offers
a higher return than normal bonds and/or has a shorter maturity. Trading takes
place on the OTC (Over The Counter) market.
> Naked: a naked, or uncovered, call option gives the purchaser the right to buy
shares that are not yet in the possession of the writer.
> Penny stocks: a name for shares with a very low absolute price on the stock
exchange.
> Rating: an assessment of the creditworthiness of a company by a rating
agency such as Moodys, S&P or Fitch.
> Option: the right to buy or sell a security at a specific price.
> Warrant: a warrant gives the holder the right, but not the obligation, to
subscribe to a capital increase at a predetermined price on or before a specific
date. This is a commonly used alternative to options in employee ownership
schemes, because the company does not need to possess any of its own shares
since new shares will be created when the warrant is exercised.
69
Index
#
100 day plan: 62
A
Acquisition: 5
Acquisition nance: 52
Alpha: 44
Announcement: 62
Anti-dilution: 59
Anti-trust filing: 7
A-shares, B-shares: 59
Asset deal: 14
Auditor: 38
Autofinancing capacity: 59
B
Bank guarantee: 9
Basis points: 53
Basket: 9
Belgian GAAP/Belgian General
Accepted Accounting Principles: 22
Beta (levered/unlevered): 44
Blocking minority: 59
Board seat: 59
Book runner: 67
Branch: 15
Breach: 53
Broker: 66
Bullet loan: 53
Business angels: 48
Buy-out fund: 48
C
CAPM/Capital Asset Pricing Model: 44
Carried interest: 50
Change of Control Clauses: 15
Clean team: 30
Closed-end fund: 50
Closing accounts: 22
Closing agreement: 7
Closing date: 19
Closing dinner: 63
Club deals: 51
CoCo/Comparable Company: 45
CoE/Cost of Equity: 43
Co-investment: 50
Commercial due diligence: 28
Committed capital: 51
Cost of debt: 43
CoTrans/Comparable Transaction: 45
Covenants: 53
Crowdfunding: 54
CP/Condition Precedent: 7
D
Data room: 30
Data Room Rules: 30
DCF(F)/Discounted Cash Flow (to the
Firm): 43
Deal advisor: 38
Deal structuring: 15
Debt and cash free: 21
Debt push down: 15
Debt syndication: 53
Defined benet plan: 28
Defined contribution plan: 28
Dilution: 66
Disclosures: 9
Discount/Premium: 45
71
Distribution: 51
Drag along: 58
Drawdown: 51
Due diligence: 25
Due diligence provider: 38
E
Earn-out: 22
EBIT/Earnings Before Interest and Tax:
43
EBITDA/Earnings Before Interest, Tax,
Depreciation and Amortization: 42
EBITDAR/Earnings Before Interest,
Tax, Depreciation, Amortization and
Rent: 42
E-data room: 30
Environmental due diligence: 29
Envy ratio: 47
Escrow: 9
Euribor: 53
Euronext Brussels: 67
EV/Enterprise Value: 45
Exclusivity: 6
Exit: 51
F
Fat lady: 63
Fairness opinion: 68
Fees: 39
FFF: 54
Financial assistance: 16
Financial due diligence: 28
Franchise: 10
Free Cash Flow: 43
Free Float: 66
FSMA: 68
72
G
Goodwill: 42
GP/General Partner: 50
Grace period: 53
Green shoe: 66
Guarantees: 8
H
Headroom: 53
Heads of agreement: 7
Health and safety: 29
Hedge funds: 49
Hedging of interest risk: 53
High yield bonds: 69
Hold harmless letter/approved reader
letter: 30
Hostile takeover: 67
Hurdle: 51
I
IFRS/International Financial Reporting
Standards: 22
Indemnities: 8
Info Memo/Information
In the money: 69
Memorandum: 34
Insider traping: 68
Institutional investor: 68
Insurance due diligence: 29
Investment horizon: 50
IPO: 66
IPO/Initial Public Offering: 49
J
Junior debt and senior debt: 52
L
Lawyer/M&A lawyer: 38
LBO/Leveraged Buy-out: 49
Leakage: 16
Legal continuity: 14
Legal due diligence: 26
Leverage: 52
List of parties: 38
Locked box: 23
LOI/Letter Of Intent: 6
Long list: 34
Long/Short position: 66
LP/Limited Partnership: 50
Luck-up arrangement: 68
M
MAC/Material Adverse Change: 7
Market CAP: 67
MBI/Management Buy-in: 49
MBO/Management Buy-out: 49
Merger: 5
Mezzanine: 52
Minimis: 12
MOU/Memorandum Of
Understanding:6
MRP/Market Risk Premium: 44
MTN: 69
Multiple: 44
N
Naked: 69
NDA/Non Disclosure
Agreement: 6
Net debt: 21 (Non) Binding: 7
NOPAT/Normalized Operating Profit
After Tax: 43
Normalized Working Capital: 21
O
Offer letter: 6
Open-end fund: 50
Operations and synergy due diligence:
29
Option: 69
P
PAT/Profit After Tax: 43
PBT/Profit Before Tax: 43
Penny Stocks: 69
Pensions due diligence: 28
PIK/Payment in Kind: 52
PMI/Post Merger Integration: 62
Poison pill: 67
Post money value: 58
Pre money value: 58
Private Equity (PE) fund: 49
Private placement: 68
Process letter: 34
Prospectus: 68
R
Ratchets: 50
Rating: 69
REBITDA/Recurring Earnings Before
Interest, Tax, Depreciation and
Amortization: 42
Release/reliance (for financiers): 29
Representations: 8
Retainer fee: 39
RF/Risk Free Rate: 44
S
Secondary buy-out: 51
Serial deal maker: 62
Share deal: 14
73
Shareholder agreement: 58
Short list: 34
SPA/Share Purchase Agreement: 7
Special situation funds: 49
Specialist advisors: 38
Spread payment: 23
Stapled/debt package: 52
Strategy: 62
Success fee: 39
Sweet Equity: 49
Synergy: 62
T
Tag along: 58
Target Working Capital: 22
Tax due diligence: 28
Tax treatment: 14
Teaser/blind prole: 34
Threshold: 9
Time and expense based fee: 39
Tombstone: 63
TUPE: Transfer of Undertakings
74
(Protection of Employment): 15
Turn around funds: 49
U
Underwriter: 67
V
VDD/Vendor (initiated) Due Diligence:
35
Vendor loan: 21
Vendor note: 21
Venture Capital: 48
Vulture funds: 49
W
WACC/Weighted Average Cost of
Capital: 43
Warrant: 69
Warranties: 8
Working Capital: 21
Your M&A Team

Jorn De Neve
Partner
Corporate Finance
jdeneve@kpmg.com
+32 708 47 78
Wouter Caers
Partner
M&A Tax
wcaers@kpmg.com
+32 3 821 19 73
Luc Heynderickx
Partner
M&A Tax
lheynderickx@kpmg.com
+32 2 708 38 16
Wouter Lauwers
Partner
Klaw advocaten/avocats
wlauwers@klaw.be
+32 2 708 38 68
Peter Lauwers
Partner
Corporate Finance
plauwers@kpmg.com
+32 3 821 18 15
Yann Dekeyser
Partner
Transaction Services
ydekeyser@kpmg.com
+32 3 821 18 64
kpmg.com/be/mandajargon
2014 Kratos Law, a Belgian civ. CVBA/SCRL civ. All rights reserved.
2014 KPMG Advisory, a Belgian civil CVBA/SCRL and a member firm
of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (KPMG International), a Swiss entity. All rights
reserved.

M and A Jargon Demystified PDF

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

M and A Jargon Demystified PDF

Uploaded by

Copyright:

Available Formats

M&A jargon

M&A jargon demystified

Dpt lgal: D/2014/2664/551

M&A jargon demystified

About KPMG M&A Services

M&A jargon demystified

M&A jargon demystified

1.1 AGREEMENTS IN GENERAL

An LOI often contains

> MOU / Memorandum Of Understanding: a statement in principle (

In addition to clauses concerning secrecy,

M&A jargon demystified

M&A jargon demystified

1.2 GUARANTEE PROVISIONS IN THE AGREEMENT

General warranties and

> Guarantees: in order to assure the

M&A jargon demystified

Classical point of contention during negotiations: does the entire

M&A jargon demystified

M&A jargon demystified

In the case of the acquisition of a group of businesses and companies, it is

> Share deal: an agreement under

see also asset deal).

An asset deal can include restrictions, such

M&A jargon demystified

European TUPE regulations protect staff in an

M&A jargon demystified

> Leakage: when setting up an acquisition financing structure involving several

M&A jargon demystified

A locked box is not recommended in situations

A classic price formulation in a contract consists of a price for the activities of

M&A jargon demystified

The analytical methods used during the due

M&A jargon demystified

M&A jargon demystified

provide a solution. It makes the final price partly

M&A jargon demystified

Period covered by the

Closing accounts to crystallize

Dec 2013 Jan 2014

Ownership and control

The locked box mechanism

Period covered by the

Ownership and control

M&A jargon demystified

M&A jargon demystified

How far do you go

Is the past a good mirror for

The existence of defined benefit

M&A jargon demystified

M&A jargon demystified

M&A jargon demystified

Making a teaser is often a difficult balancing act between

M&A jargon demystified

> VDD / Vendor (initiated) Due Diligence: a due diligence investigation

The seller is the initial client of a vendor due

M&A jargon demystified

In a transaction, various advisors provide guidance to their clients and

An M&A team usually consists of a combination

M&A jargon demystified

Is the fee structure of the advisor in line with

M&A jargon demystified