133 terms with definitions, formulas and deal context.
Valuation
Business Valuation — Business valuation is the structured estimate of what an operating business is worth to a specified buyer or owner, using income, market and (less often) cost evidence. The output is usually a range for enterprise value and equity value, not a single magic number.
Company Valuation — Company valuation estimates the worth of a legal entity and its claims—typically the shares—after deciding which assets, liabilities and cash flows sit inside that entity. It is the same craft as business valuation, but the unit of analysis is the company (or group) rather than a loosely defined 'business'.
Enterprise Value — Enterprise value (EV, also TEV or firm value) is the capital-structure-neutral worth of the operating business, available to all providers of capital. It is the quantity that EV/EBITDA and unlevered DCFs are built to explain.
Equity Value — Equity value is the worth of ordinary shareholders' residual claim after debt-like obligations and other senior capital. In a listing it is (fully diluted) market capitalisation; in a private deal it is the proceeds the sellers of shares actually receive.
Market Value — Market value is the price observed (or hypothetically observed) in an actual market for an asset or for a company's equity. It is evidence, not a guarantee of [intrinsic value](/resources/glossary/intrinsic-value), and it is only as good as the market's liquidity and the lot size being priced.
Fair Value — Fair value, as defined in IFRS 13, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is an exit price, classified in a three-level input hierarchy.
Intrinsic Value — Intrinsic value is an estimate of worth derived from the asset's expected cash flows, risk and growth—not from the last traded price. It is the output of a fundamental model, most often a DCF, and it can sit above or below market value for long periods.
Valuation Multiple — A valuation multiple is a ratio that expresses price (enterprise or equity) per unit of a value driver such as EBITDA, revenue or earnings. One well-chosen multiple compresses a peer or deal observation into a pricing factor you can apply to the target.
Valuation Multiples — Valuation multiples are the panel of price-to-driver ratios used together in relative valuation: typically EV/EBITDA, EV/EBIT, EV/revenue, P/E and, where relevant, P/B or sector-specific metrics. Reading them as a set is how you see whether a company is cheap or simply different.
EBITDA Multiple — An EBITDA multiple is enterprise value divided by EBITDA—the workhorse mid-market pricing factor. It answers how many years of current (or forward) cash earnings the market or a buyer is paying for the operations, before leverage.
Revenue Multiple — A revenue multiple prices the firm off the top line, almost always as EV/revenue (or EV/ARR in subscription businesses). It is used when earnings are negative, early, or incomparable—and it is dangerous when margins differ.
EV/EBITDA — EV/EBITDA is enterprise value divided by earnings before interest, tax, depreciation and amortisation. It is the standard capital-structure-neutral earnings multiple used to compare firms and to price cash-generative deals.
EV/Revenue — EV/Revenue (EV/sales) is enterprise value divided by sales. It is the formal ratio behind revenue-based pricing, used to compare firms when margins are not yet comparable or earnings are negative.
Comparable Companies — Comparable companies are the peer set whose trading prices supply market evidence for relative valuation. A good set shares economics—not merely a GICS label—and produces multiples you can defend in a committee.
Comparable Company Analysis — Comparable company analysis (CCA, or trading comps) is the workflow that screens peers, computes consistent trading multiples, and applies those multiples to the target. It is the market approach executed on listed evidence.
Precedent Transactions — Precedent transactions are completed (or firmly announced) deals whose implied multiples provide market evidence for control pricing. They usually sit above trading comps because they embed control, process dynamics and, often, synergies.
Discounted Cash Flow — Discounted cash flow (DCF) values an asset as the present value of expected future cash flows, discounted at a rate that matches the risk of those cash flows. In firm valuation the usual cash flow is FCFF and the usual rate is WACC.
DCF — DCF is the industry abbreviation for discounted cash flow. When someone says 'run a DCF', they mean build (or refresh) a present-value model of expected free cash flow—usually to test a price, not to decorate a pitch book.
Terminal Value — Terminal value is the present-value stand-in for all cash flows after the explicit forecast. In a typical DCF it is most of enterprise value, computed either as a growing perpetuity of FCFF or as an exit multiple on a mature earnings measure.
Net Debt — Net debt is interest-bearing debt and debt-like claims minus cash (and surplus cash-like investments). It is the bridge item that turns enterprise value into equity value in a cash-free, debt-free deal.
Trading Multiples — Trading multiples are valuation ratios taken from current (or recent) public-market prices of comparable companies—typically EV/EBITDA, EV/EBIT, EV/revenue and P/E. They reflect minority, liquid marks, not control deal prices.
Transaction Multiples — Transaction multiples are valuation ratios implied by announced or completed M&A deals—usually EV/EBITDA or EV/revenue on the consideration. They price control (and often synergies), and they must be rebuilt from deal terms, not copied from a headline.
Sum-of-the-Parts Valuation — Sum-of-the-parts (SOTP) valuation values each business segment with a method and peer set that fit that segment, then adds them up and subtracts net debt, NCI and holding-company costs. It is the tool for conglomerates and mixed models a single multiple cannot describe.
M&A
M&A — M&A is the market and professional practice of combining, buying and selling companies and business units — from origination and valuation through due diligence, financing, documentation and closing.
Mergers and Acquisitions — Mergers and acquisitions is the expanded name for M&A: legally, a merger combines two entities into one surviving or new company, while an acquisition is a purchase of a target’s shares or assets by a buyer that remains a separate legal person.
Merger — A merger is a legal combination of two (or more) companies into a single surviving or newly formed entity, usually with an exchange of shares rather than a one-way cash purchase.
Acquisition — An acquisition is a transaction in which a buyer obtains control of a company or a business — usually by purchasing shares or assets — while remaining a distinct legal entity from the target.
M&A Advisory — M&A advisory is the professional service of originating, structuring, valuing, negotiating and closing mergers, acquisitions and divestitures — typically provided by investment banks, boutiques or corporate-finance houses on a mandate.
M&A Advisor — An M&A advisor is the person or firm retained to run or support a transaction — the named professional on the engagement letter — as distinct from the generic service line called M&A advisory.
Sell-Side — Sell-side is the advisory and process posture of representing the seller — preparing the company, running outreach or an auction, and negotiating with buyers — as opposed to buy-side, which represents a purchaser.
Buy-Side — Buy-side is the advisory and process posture of representing a purchaser — origination, screening, valuation, bid strategy, diligence coordination and negotiation — as opposed to sell-side, which represents the seller.
Business Sale — A business sale is a change-of-control transaction in which owners transfer a whole enterprise — shares or the operating assets that constitute the business — typically as a planned exit rather than a sale of surplus property.
Company Sale — A company sale is a transaction whose perimeter is the legal entity — almost always a sale of shares — as opposed to a business sale framed as assets, or a sale of a division carved out of a larger parent.
Strategic Buyer — A strategic buyer is an operating company that acquires a target to combine it with an existing business — seeking customers, products, talent, geography or cost synergies — rather than as a financial investment vehicle.
Financial Buyer — A financial buyer is an investment vehicle — typically private equity, and sometimes a family office or independent sponsor — that acquires a company to earn an investment return, using underwriting, leverage and a planned exit rather than industrial synergies as the core thesis.
Corporate Buyer — A corporate buyer is a non-fund operating company using its balance sheet to acquire. Most corporate buyers are strategic; the term also covers conglomerates and holding companies whose bid looks financially sponsored even without a PE fund.
Private Equity Buyer — A private equity buyer is a PE fund (or its Bidco) acquiring control of a company, usually with leverage, professional governance and a defined hold period — the most common species of financial buyer in mid-market auctions.
Exit Strategy — An exit strategy is a planned path to liquidity for owners and investors — typically a trade sale, sponsor sale, IPO, recap or orderly wind-down — with a thesis for buyer type, timing and value.
Exit Planning — Exit planning is the practical work of making a company sellable on a chosen exit strategy: financial hygiene, management depth, customer contracts, tax structure, timing and a diligence-ready data room.
Trade Sale — A trade sale is an exit in which the buyer is an operating company in the same or adjacent industry — a strategic or corporate buyer — rather than a financial sponsor or the public markets.
Divestiture — A divestiture is a seller-initiated sale or disposal of a business, subsidiary or significant asset — usually by a corporate or a fund pruning a portfolio — rather than a founder selling the whole company they built.
Carve-Out — A carve-out is the separation of a business from its parent — legally, operationally and financially — so it can be sold, listed or stood up as a standalone, usually with transition services for a period after closing.
Spin-Off — A spin-off is the separation of a subsidiary or division by distributing its shares to the parent’s existing shareholders, creating a new independent company without a third-party cash sale.
Management Buyout — A management buyout is a change-of-control in which the incumbent management team acquires a significant or controlling equity stake, usually with a financial sponsor and leverage, rather than selling the company to an unrelated strategic.
MBO — MBO is deal shorthand for management buyout: when practitioners say “it’s an MBO,” they mean sitting management is taking equity control (usually with a sponsor and debt), not that a new CEO is being hired.
Management Buy-In — A management buy-in is a takeover in which an external management team acquires a company (usually with a financial sponsor and leverage), replacing or supplementing incumbent operators rather than buying as sitting management.
MBI — MBI is deal shorthand for management buy-in: an external team is taking the company, typically with private equity. It is the counterpart abbreviation to MBO, not a type of loan.
Leveraged Buyout — A leveraged buyout is an acquisition financed with a material amount of debt secured on the target’s cash flows and assets, so equity writes a minority of the cheque and returns are amplified — in both directions.
LBO — LBO is practitioner shorthand for leveraged buyout — and, by extension, for the model, the debt package and the PE deal style. “Run the LBO” means underwrite debt capacity and equity returns, not merely “buy the company.”
Corporate Finance
WACC — WACC is the weighted average cost of capital: the blended required return on the firm's operating capital, after the tax shield on debt. It is the discount rate for unlevered free cash flow in a standard firm DCF.
Weighted Average Cost of Capital — The weighted average cost of capital is the opportunity cost of the operating capital structure: each source of capital is costed at market required returns, weighted by market value, with debt after tax. It is the hurdle for projects with the same risk and financing mix as the firm.
Discount Rate — A discount rate is the required return used to convert future cash into present value. In firm DCF it is usually WACC; in equity DCF it is the cost of equity. It must match the risk and the currency of the cash flows being discounted.
Common Equity — Common equity is the residual ownership of a company: last in line after debt and preferred claims, with voting rights that vary by class, and unlimited upside if anything remains.
Capital Structure — Capital structure is the mix of claims on a company — senior debt, junior debt, hybrids, preferred and common equity — including their priority, covenants and cost. It determines who gets paid in what order and how fragile the company is to a downturn.
Investment
Family Office — A family office is a private organisation that invests and administers the wealth of one family (single-family office) or several (multi-family office). In deals they can act as long-duration financial buyers without a classic PE fund clock.
Venture Capital — Venture capital is private investment in early and high-growth companies with substantial failure risk, usually via preferred shares or convertibles, in exchange for a minority stake and a shot at outsized residual value.
Angel Investor — An angel investor is an individual (or a small syndicate of individuals) who writes an early cheque, usually before institutional venture funds lead. Angels invest their own capital and often their time; they are not a fund with an LP mandate.
Institutional Investor — An institutional investor is an organisation that invests as a professional fiduciary — pension funds, insurers, endowments, sovereign funds, banks’ principal arms, and funds of funds — rather than as a founder or an individual angel.
Strategic Investor — A strategic investor is a corporation investing for industrial reasons — distribution, technology, supply, or a path to acquisition — in addition to, or instead of, a pure financial return.
Preferred Shares — Preferred shares are equity with contractual privileges — typically a liquidation preference, sometimes a dividend, conversion rights and vetoes — that sit economically between debt and common stock.
Pre-Money Valuation — Pre-money valuation is the agreed value of a company’s equity immediately before new money in a priced round. It is a deal price for the round, not an independent appraisal of the firm.
Post-Money Valuation — Post-money valuation is pre-money valuation plus the new equity capital in the round (with careful treatment of notes converting and of the option pool). It is the denominator for the new investors’ ownership.
Dilution — Dilution is the reduction in an existing holder’s percentage of the company (and often of the exit waterfall) when new shares, options or converting instruments are issued. Price per share can rise while your percent falls.
Cap Table — A cap table is the ledger of who owns what: shares, options, warrants, convertibles, and the waterfall of who gets paid in a sale. It is the ownership truth of the company.
Private Equity
Growth Equity — Growth equity is a private capital strategy that takes a significant minority (sometimes a thin majority) in a scaled, often profitable company to fund expansion — with less leverage than a buyout and less product risk than venture.
Private Equity — Private equity is professionally managed capital that acquires private (or taken-private) companies, improves them, and sells them. The classic vehicle is a closed-end fund using committed capital from limited partners, often with leverage on control deals.
Co-Investor — A co-investor invests in a company alongside a lead sponsor — typically an LP writing a cheque next to a PE or VC fund — sharing the equity risk without paying the full fund fee load on that slice.
Capital Raising
Capital Raising — Capital raising is the process of bringing new money into a company — equity, debt or a hybrid — to fund growth, acquisitions, working capital or a recapitalisation. It is a transaction with a price, a structure and a set of counterparties, not a slogan.
Fundraising — Fundraising is capital raising described as a campaign: a round with a target, a timeline and a list of investors being worked. In venture it means a priced or convertible round; in private equity it often means a GP raising a fund from LPs.
Equity Financing — Equity financing raises capital by issuing ownership — common shares, preferred shares or a security that will convert into them. The company does not promise to repay a principal; it sells a claim on residual value and usually some control.
Debt Financing — Debt financing raises capital that must be serviced and repaid — bank loans, bonds, unitranche, mezzanine or shareholder loans — in exchange for interest, covenants and a claim that ranks ahead of equity.
Growth Capital — Growth capital is money — usually minority equity, sometimes delayed-draw debt — intended to fund expansion rather than to buy out owners. The company is already operating; the capital is meant to scale it.
Convertible Note — A convertible note is a loan that is designed to convert into equity at a later priced round, usually with a discount and/or a valuation cap. Until conversion it is debt; after conversion it is a slice of the cap table.
Bridge Financing — Bridge financing is short-dated capital meant to reach a defined event — a priced round, a sale, or cash-flow breakeven. It is a timing instrument. If the event misses, the bridge becomes the capital structure.
Due Diligence
Due Diligence — Due diligence is the structured investigation a buyer, investor or lender runs on a target before committing capital. In M&A it is a set of workstreams — financial, commercial, legal, tax and operational — designed to test whether the story, the numbers and the contracts will survive contact with reality.
Financial Due Diligence — Financial due diligence is the buy-side (or vendor) review of historical financials, cash conversion, net debt, working capital and earnings quality. Its job is to turn reported accounts into a deal basis the parties can price.
Commercial Due Diligence — Commercial due diligence tests whether the target’s market, customers, pricing power and competitive position support the investment thesis. It is the workstream that challenges growth, not just the historical accounts.
Legal Due Diligence — Legal due diligence is the review of corporate title, contracts, litigation, employment, IP and regulatory standing so a buyer knows what rights it is actually buying and which consents it needs before closing.
Tax Due Diligence — Tax due diligence reviews the target’s tax filings, exposures, attributes and the tax consequences of the deal structure. It tells the buyer what historical risk it is inheriting and how the purchase itself will be taxed.
Operational Due Diligence — Operational due diligence examines how the business actually runs — people, systems, supply chain, IT, quality and integration load — so the buyer knows what it must keep, fix or fund after closing.
Quality of Earnings — A quality of earnings analysis rebuilds reported profit into a sustainable, deal-basis earnings figure. It identifies adjustments, accounting policies and cash conversion so buyers are not paying a multiple of a number that will not repeat.
QoE — In deal rooms, “QoE” means the quality-of-earnings report — the document bankers, PE partners and CFOs point to when they argue about adjusted EBITDA. Saying “the QoE is out” is a process milestone, not a new methodology.
Financial Metrics
Free Cash Flow — Free cash flow is the cash operations can distribute after tax and reinvestment. FCFF (unlevered) is cash to all capital providers; FCFE (levered) is cash to equity after debt service and net borrowing.
EBITDA — EBITDA is a non-GAAP earnings measure that starts from operating profit and adds back depreciation and amortisation, so lenders and buyers can compare cash-like operating performance across capital structures and accounting depreciation policies.
EBIT — EBIT is operating profit: earnings after all operating costs including depreciation and amortisation, but before finance costs and tax. It is the IFRS-friendly sibling of EBITDA and the starting point for ROIC.
EBITDA Margin — EBITDA margin is EBITDA divided by revenue. It shows how much of each unit of sales remains after cash operating costs but before depreciation, interest, tax and capex.
Revenue — Revenue is income from the ordinary activities of the business — under IFRS 15, the consideration earned as performance obligations to customers are satisfied. It is not cash collected, bookings, or ARR.
ARR — ARR is a non-GAAP operating metric: the annualised value of contracted recurring revenue at a point in time. It is a run-rate, not IFRS 15 revenue and not cash collected this year.
MRR — MRR is the monthly expression of contracted recurring revenue. It is the operational dashboard metric; ARR is usually the annualised version used in fundraising and M&A.
Recurring Revenue — Recurring revenue is income that is contractually or behaviourally expected to repeat — subscriptions, maintenance, retainers, contracted usage — as distinct from one-off product, project or professional-services sales.
Gross Margin — Gross margin is gross profit divided by revenue: the share of sales left after direct costs of delivering the product or service, before operating overhead, depreciation policy debates, interest and tax.
Operating Margin — Operating margin is operating profit (EBIT) divided by revenue. It shows how much of sales remains after operating costs and depreciation, before financing and tax.
Net Profit Margin — Net profit margin is net profit divided by revenue — the residual share of sales after operating costs, depreciation, finance costs and tax. It is the owner’s ratio, not the firm’s operating ratio.
Operating Cash Flow — Operating cash flow is cash generated by the core business after working-capital movements, as presented in the operating section of the statement of cash flows under IAS 7 — before investing capex and financing.
CAPEX — CAPEX is cash invested in long-lived assets — property, plant, equipment and capitalised intangibles — reported in investing cash flows. It is the reinvestment EBITDA never subtracts.
OPEX — OPEX is the period cost of running the business that is expensed as incurred — payroll, rent, marketing, professional fees, most R&D — as opposed to CAPEX, which is capitalised onto the balance sheet.
Working Capital — Working capital is the operating balance sheet: typically current operating assets minus current operating liabilities. In deals it is the cash tied up in receivables, inventory and payables that must be normalised at closing.
Debt-to-EBITDA — Debt-to-EBITDA is a leverage ratio: interest-bearing debt (sometimes net of cash) divided by EBITDA. It is the common language of credit agreements, rating conversations and LBO debt capacity.
Interest Coverage Ratio — Interest coverage divides operating earnings by interest expense to show how many times the business can service its debt cost. EBIT/interest is the classic ratio; EBITDA/interest is the looser credit-market variant.
CAGR — CAGR is the constant annual growth rate that takes a starting value to an ending value over n years. It is a geometric average — it ignores the path between the two points.
ROI — ROI is a simple return ratio: gain from an investment divided by its cost. It is intuitive and dangerously undefined unless you specify the cash flows, the time period and whether money is time-weighted.
ROIC — ROIC is after-tax operating profit divided by the capital actually invested in operations. It is the core test of whether a business earns more than its cost of capital.
IRR — IRR is the discount rate that sets the net present value of a cash-flow stream to zero. It is the money-weighted return investors use for funds, LBOs and projects with timed inflows and outflows.
ROE — ROE is net profit divided by book equity. It is the residual accounting return to shareholders and rises automatically with leverage — which is why it is a poor standalone quality metric in M&A.
ROA — ROA is net profit (sometimes operating profit after tax) divided by total assets. It is a crude asset-productivity ratio that mixes operating assets with cash, goodwill and financing structure.
Deal Structures
Letter of Intent — A letter of intent is a pre-definitive document that records price, structure and process for a proposed transaction. Most commercial terms are non-binding; exclusivity, confidentiality and governing law are often binding.
LOI — On live deals, “LOI” is the milestone: a signed letter of intent. Saying “we have an LOI” means exclusivity is likely in force and diligence can start — not that the company has been sold.
NDA — In transactions, “NDA” is the gate. Until it is signed, the serious [data room](/resources/glossary/data-room) stays shut. Practitioners use the abbreviation for the agreement, the process step and the access log.
Non-Disclosure Agreement — A non-disclosure agreement is a contract that defines confidential information, permitted use, representatives, duration and remedies. In M&A it is the legal basis for sharing a CIM, a data room and management presentations.
Term Sheet — A term sheet is a concise statement of the economic and control terms of a proposed investment or acquisition. In venture it is the main pre-definitive document; in M&A it often overlaps with a letter of intent.
SPA — In M&A rooms, “the SPA” is the definitive share deal. People say SPA the way they say “the contract”: signing the SPA is a milestone; closing may still be weeks away.
Share Purchase Agreement — A share purchase agreement is the definitive contract for buying the shares of a company. The buyer steps into the legal entity — assets, contracts and liabilities included — on the terms set out in the SPA.
APA — In deal slang, “APA” means we are buying assets, not the company. It signals a different tax profile, a consent-heavy closing, and a narrower liability perimeter than an SPA.
Asset Purchase Agreement — An asset purchase agreement is the definitive contract for buying specified assets and assuming specified liabilities of a business, rather than buying the company’s shares.
Closing — Closing (completion) is the moment the deal becomes real: shares or assets transfer, funds move, and control changes. Signing may have happened earlier; closing is when conditions have been satisfied.
Earnout — An earnout is contingent consideration: part of the price is paid later if the business hits agreed targets. It bridges a valuation gap when buyer and seller do not share the same view of future earnings.
Escrow — In M&A, escrow means a slice of the price parked with a third party (or held back) to secure warranty claims, specific indemnities or adjustment true-ups. It is risk collateral, not a second earnout.
Purchase Price Adjustment — A purchase price adjustment is the contractual machinery that turns a headline enterprise value into the cash the seller actually receives, using net debt, working capital, locked box or completion accounts.
Locked Box — A locked box fixes the equity price from a historical balance sheet. The company is “locked”: value taken out after that date is leakage the seller must refund. There is no post-closing true-up of working capital.
Completion Accounts — Completion accounts are a closing-date (or completion-date) balance sheet used to true-up cash, debt and working capital against targets in the SPA. The equity price moves after closing when the accounts are agreed.
Working Capital Adjustment — A working capital adjustment changes the equity price so the buyer receives a “normal” level of trade working capital at closing. Above the peg, the seller is paid more; below, the price falls.
Representations and Warranties — Representations and warranties are contractual statements about the company — accounts, contracts, tax, employees, IP — that allocate unknown risk. If they are wrong, the buyer has a claim, subject to caps, baskets and disclosure.
Data & Transactions
Data Room — A data room is the controlled collection of documents and information a company opens to counterparties during a sale, investment or financing. It is the evidence layer of the process: what you show, to whom, and with what log.
Virtual Data Room — A virtual data room is a hosted, access-controlled repository for deal documents: permissions, watermarks, view logs and Q&A replace the old locked conference room. It is infrastructure for diligence, not intelligence by itself.
VDR — On live deals, “VDR” means the link, the login and the process status. “You’re in the VDR” means confirmatory access has started — not that the files have been understood.
Smart Data Room — A smart data room is a centralized company-information layer: documents are not only stored, they are structured so intelligence, valuation, investor matching and due diligence can run on the same objects. Dazur uses this as the core of its transaction model.
AI Data Room — An AI data room uses machine learning on top of a deal repository to classify documents, extract fields, flag gaps and draft questions. It is an assistant on the room — useful only if the underlying information is structured and permissioned.
AI Due Diligence — AI due diligence is the use of models to scan, extract and flag issues across a deal file — financial anomalies, missing documents, contract clauses — while humans still own scope, materiality and conclusions.
Investor Data Room — An investor data room is the permissioned pack shown to prospective equity or fund investors: historicals, model, cap table, key contracts and rights — usually shallower than a full buy-side M&A room until a lead is in exclusivity.
M&A Data Room — An M&A data room is the diligence repository for a company sale or acquisition: full financial, legal, tax, commercial and operational files, staged by process phase, and built so bidders can underwrite a price and an SPA.
Investor Matching — Investor matching is the disciplined pairing of a company with counterparties whose mandate, cheque size, sector, geography and instrument actually fit — rather than blasting a teaser to every name in a CRM.
Deal Pipeline — A deal pipeline is the staged set of live opportunities a buyer, investor or advisor is working — from origination through NDA, diligence, IC and close — with enough status to manage attention and capital.
Deal Management — Deal management is the operating system of a live transaction: counterparties, permissions, documents, Q&A, workstreams, dates and decisions held in one place so the process does not live in inboxes.