Glossary: Financial Terms
The part or whole procurement of one company by another
A public sale in which the vendor publishes intention to sell a business/asset by a specific date, which in turn generates an auction process.  The business is then usually sold to the highest bidder.
Buy-In MBO (Buy In Management Buy Out)
The acquisition of a company by a venture capitalist or private equity investor in which the management of the acquired company is supplemented by an outside management team brought in by the acquirer.
Buy and Build
An acquisition forming part of a private equity firms strategy to consolidate a particular industry sector by buying a number of different companies and merging them.  A portfolio company of the private equity firm normally makes the acquisition, although in some cases, mainly for tax reasons, the acquisition can be executed using a new company specifically created for the transaction.  A buy and build strategy can be identified from the press release of the deal, if there is a statement that the private equity firm plans to bolt/merge the acquisition with another one of its portfolio companies.
Contested, Hostile
Where there is more than one bidder and the proposal is hostile.
Contested, Recommended
A bid is contested when there is more than one bidder.  A contested recommended bid describes the bid that has been recommended by the target management in the face of a competing bid.
Contested, White knight
Occurs when a company that is subject to a contested hostile bid seeks a friendly merger partner to fend off the hostile bidder.
Cross Border
A transaction that is conducted across national boundaries i.e. a deal that involves companies from at least two different nationalities.
Deal Value
Deal Value reflects what actually happens on the deal itself and reflects a stake purchase and whether net debt is assumed by the bidder party. The rule we follow is that if the acquirer acquires more than 50% of the share capital of the target company, or if the acquirer ends up with a total stake in the target that exceeds 50% (i.e. they hold 30% and acquire a further 30%), then we include 100% of the net debt in the deal value. If the stake is less than 50%, we do not include net debt in the deal value. With this logic, if the acquirer acquires 100% control of the target, then the deal value will equal the enterprise value (they purchase all shares and assume all net debt). If the acquirer acquires say a 60% stake in the target, then the deal value will represent the value of 60% of the share capital acquired (i.e. 60% of Implied Equity Value (IEV)) but will also include 100% of the net debt assumed. Finally, if the acquirer acquires say a 30% stake, the deal value will simply represent the value this stake (i.e. 30% of the IEV).
Occurs when a company decides to split off one of its subsidiaries to its shareholders, resulting in the creation of a separate business divorced from the activities or influences of the former parent; in other words, the shareholders end up holding two share certificates (one for each company) as opposed to one share certificate in the original business.  Note that neither the company nor shareholders receive any cash as a result of the deal (as opposed to as flotation or IPO where the company receives cash).
The agreed sale of an asset or assets from one company to another, distinguished from other transactions by the fact that it is the vendor which actually initiates the transaction.
A transaction conducted within a national boundary i.e. a deal involving two or more incumbent nationals.
EBO (Employee Buy Out)
The acquisition of a company by its employees and management.
Educational and Training Services
Companies providing any educational and training services. Examples include educational publishing, colleges/schools, educational software, online educational programs and games.
Enterprise Value
Enterprise Value if effectively the value of the target company as a whole and is an automated calculation performed by the system by adding the Implied Equity Value (from above) and the net debt of the target company. The net debt is based on all interest bearing debt minus cash and cash equivalents.
Occurs when a financial institution, such as private equity firm or venture capitalist realizes its investment in a company.  This is usually achieved by selling its stake to a trade buyer or another financial buyer, or by floating the company on the stock exchange.
IBI (Institutional Buy In)
Initiated when a financial institution, such as a private equity firm or venture capitalist, acquires a stake in another company, often in conjunction with a trade buyer.
IBO (Institutional Buy Out)
Similar to an IBI, but in this scenario the financial institution, ordinarily a principal finance house or private equity firm, operates without a trade partner and usually acquires 100% of the target.
Implied Equity Value
Implied Equity Value is the value of the entire outstanding share capital of the target company (i.e. 100%) valued at what the bidder is valuing those shares, hence why they are implied. The value will always represent 100% regardless of what stake is actually being acquired.
Occurs when a company files for bankruptcy and sells off part or all of its assets to bring in the cash necessary to satiate creditors.
Joint Venture
A transaction that involves the pooling of assets between firms in a new company or existing subsidiary, whereby the ownership of the new company is shared between the parent companies involved.
MBI (Management Buy-In)
The acquisition of a company by an external management team which is usually backed by a venture capitalist or private equity investor.
MBO (Management Buy-Out)
The acquisition of a company by its incumbent management team which again is usually backed by a venture capitalist or a private equity investor.
A transaction that involves the combination of two or more separate businesses into one, with equal holding and governance rights assigned to the respective shareholders of each company.
An M&A transaction that does not require shareholder approval in a public forum either from the bidder, target or vendor shareholders.
A transaction that requires approval either from the bidder, target or vendor shareholders in a public forum.
A friendly transaction where the parties involved reach agreement over the terms of the deal normally prior to the acquisition being formally announced through a joint press release.
Reverse takeover
An acquisition of a company that is significantly larger than the bidder.  The bidding company issues shares in itself to the targets shareholders as consideration.  Through this exchange, the targets shareholders end up owning most of the bidding company, hence the reason why it is a takeover in reverse.  Such a deal often sees the acquirer changing its name to that of the target.
Secondary Buyout
A deal that represents an exit for a buyout to another private equity backed vehicle.
Strategic Alliance
An agreement between two or more companies involving the joint manufacture, distribution, and maintenance of products and services, which included the transfer of stakes between the involved companies.
Take private
As the term suggests, the acquisition of a publicly quoted company, usually by a financial institutions such as private equity firm or venture capitalist (as opposed to a trade purchaser), and its subsequent delisting
A transaction that involves at least one company from the United States, Canada, Central America or the Caribbean tying up a deal with one or more companies from Europe.  All transatlantic deals will be identified as cross border.
Unsolicited, Hostile
A deal is unsolicited if at announcement the target has not recommended the deal. A deal is hostile if the target management does not recommend within two weeks.
Unsolicited, Recommended
A deal is unsolicited if at announcement the target has not recommended the deal.  A deal is unsolicited recommended if the management recommends the deal within two weeks of the announcement date.
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