Business Development: A
AAccrual Basis Accounting: A method of accounting wherein income and expenses are recognized, within the statements, when the business first acquires the right to receive the income, or the obligation to pay the expense. Companies with inventories are required to use the accrual method for tax purposes. (Also see Cash Basis Accounting.)
Accretion: An improvement in per share metrics post-transaction (after issuing additional shares).
Acquiree: or Target CompanyThe company which is being merged or taken over by the other company.
Acquirer: The firm that is purchasing a company in an acquisition – the buyer.
Acquirer, Predator, Offeror: The company which is making a bid for the merger or takeover of another company
Acquisition: The purchase of the controlling interest or ownership of another company. This can be effected by:Agreement with the persons having majority stakePurchase of shares in the open marketOffer to the general body of shareholdersPurchase of new shares by private agreementAcquisition of new share capital
Acquisition of assets: Acquirer may purchase only assets or some specific assets and not all the assets and liabilities of the company.
Add-backs: All or a portion of expenses that are added back to net income in an effort to place the figures as close as possible to the economic earnings that were actually derived from the business.
Add-On Acquisition: Refers to a company that is added by a private equity firm to one of its platform companies, or by a strategic buyer pursuing a consolidation investment strategy.
Adjusted Book Value: The measure of a company’s valuation after liabilities, including off-balance sheet liabilities, and assets are adjusted to reflect true fair market value.
Adjusted Book Value Method: A valuation method within the Asset Approach category whereby all assets and liabilities (including off-balance sheet, intangible, and contingent) are adjusted to their fair market values.
Adjusted EBITDA: Adjusted earnings before taxes, interest income or expense, non-operating and non-recurring income/expenses, depreciation and other non-cash charges and prior to deducting an owner’s/officer’s compensation, but after replacing that owner’s/officer’s compensation and benefits with the market rate compensation and benefits to replace that owner’s/officer’s functions. This is a measure of a company’s operating performance without having to factor in financing decisions, accounting decisions or tax environments.
Adjusted Net: See Discretionary Earnings.
Adjusted Net Asset Method: See adjusted book value method.
Aging Accounts Receivable: A snapshot of the accounts receivable, usually alphabetized, as of the date of the balance sheet you are using, wherein each account receivable is shown in columnar form as either current, over 30 days, over 60 days, over 90 days, or over 120 days delinquent. The ageing report is the primary tool used by collections personnel to determine which invoices are overdue for payment.
Alert: – Notifications by email or to a home page, updating users to changes to items that they have subscribed. Examples might include notifications about performance changes or commentary.
Amalgamation: It is blending of two or more companies. The shareholders of each company become the shareholders of the company which is undertaking the activity. It is similar to a merger.
Amalgamation/Consolidation: The joining of one or more companies into a new entity. None of the combining companies remains; a completely new legal entity is formed.
Amortization: This is an accounting technique, used for tax planning purpose, to periodically lower the book value of a loan or an intangible asset over a set period of years. This is accomplished by monthly lowering the intangible asset value on the balance sheet by a specific amount and charging that same amount to expense on the income statement. The amount of amortization taken as a non-cash charge in any given accounting period is almost always based upon number of years approved by the appropriate taxing authority for cost recovery. See also Depreciation, which is the corresponding accounting technique for tangible assets.
Analysis: The act or process of providing information, recommendations and/or conclusions on diversified situations, processes or problems in businesses, other than estimating value. Also (as a noun), the result of the act or process of analysis.
Appointment Setting: – Contacting prospective customers with the objective of arranging sales meetings.
Appraisal: The act or process of estimating value. Also, the result of the process of estimating value. The words “valuing” (verb) and “valuation” (noun) are synonymous with “appraisal.”
Appraisal Surplus: the market value of equipment or real estate less the book value of equipment or real estate
Arbitrage Pricing Theory: a multivariate model for estimating the cost of equity capital, which incorporates several systemic risk factors
Asking Price: The total amount for which a business or an ownership interest is offered for sale. The asking price could be inclusive or exclusive of inventory or other assets.
Asset (Asset-Based) Approach: a general way of determining a value indication of a business, business ownership interest, or security using one or more methods based on the value of the assets net of liabilities.
Asset Deal: The acquirer purchases only the assets of the target company (not its shares).
Asset Sale: This term has two definitions. The proper definition depends on its usage: A) the means by which a business owner transfers ownership of tangible and intangible assets, and possibly some liabilities, to another owner without transferring the ownership entity; B) the sale of a business enterprise that is no longer a viable ongoing concern at a price based solely upon the value of the tangible assets.
Business Development: B
Backward integration: This is a process by which a company acquires another company that produces the raw material or the ancillaries which are used by the former. This type of takeover guarantees, to a certain extent, an uninterrupted supply of raw materials and components at fair prices.
Balance Sheet: A financial statement that is one of the three important financial statements used for reporting a company’s financial performance, with the other two key statements being the income statement and the statement of cash flows. The balance sheet is a statement of the financial status of the business on a certain date. More explicitly, it is a financial statement that reports a company’s assets, liabilities and shareholders’ equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure. It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by its shareholders.
Balanced Scorecard: – An integrated framework for describing strategy through the use of linked performance measures in four, balanced perspectives ‐ Financial, Customer, Internal Process, and Employee Learning and Growth. The Balanced Scorecard acts as a measurement system, strategic management system, and communication tool.
Barrier to entry: Any obstacle that makes it difficult for a business to enter and succeed at generating revenues in an existing marketplace. Barriers to entry can include government regulations, the need for licenses, and having to compete with other larger companies as a small business start-up.
Bear hug: It is used in takeover situations. It is an indication to the board of a target company that an offer of takeover is under consideration. A
Benchmarking: – The comparison of similar processes across organizations and industries to measure progress, identify best practices, and set improvement targets. Results may serve as potential targets for key performance indicators.
Benefit Stream: Any level of income, cash flow, or earnings generated by an asset, group of assets, or business enterprise. When the term is used, it should be supplemented by a definition of exactly what it means in the given valuation context.
Beta: a measure of systemic risk of a stock; the tendency of a stock’s price to correlate with changes in a specific index
Black knight: An unwelcome takeover bidder.
Blockage Discount: an amount or percentage deducted from the current market price of a publically traded stock to reflect the decrease in the per-share value of a block of stock that is of a size that could not be sold in a reasonable period of time given normal trading volume
Blue-Sky: That portion of a “claimed” value or requested price that cannot be supported, or generally shown to exist, through the application of established valuation methodology. Alternatively, it is that excess value, above the business’ financial value, paid by a strategic buyer based on the buyer’s perceived future value of that business.
Book Value: Book Value of a company is the difference between a company’s total assets and liabilities. Book Value of an asset is the value at which the asset is carried on a balance sheet, calculated by subtracting its accumulated depreciation from the original cost of the asset.
Bootstrap acquisition: This term is used in connection with a friendly takeover. When threatened with a hostile takeover, the target company exchanges some of its assets for shares held by dissident shareholders. Later on, the target company sells itself to a friendly acquirer who gets 100% of the target company for less than what it would have paid otherwise. The target company has virtually helped finance part of the takeover.
Bootstrap Effect: One of the poor reasons to make a merger. If the target’s P/E ratio is lower than the acquirer’s P/E ratio, the EPS of the acquirer increases after the merger. However, it is purely an accounting/numerical phenomenon, and no value or synergies are created.
Bottom Line: The net income "line" of the income statement
Budget: – A description of the funding of existing and/or proposed actions.
Business: see business enterprise
Business Broker: A professional intermediary dedicated to serving clients and customers who desire to sell or acquire businesses. A business broker is committed to providing professional services in a knowledgeable, ethical and timely fashion. Typically, a business broker provides information and business advice to sellers and buyers, maintains communications between the parties and coordinates the negotiations and closing processes to complete desired transactions.
Business Brokerage Association: Organization that contributes to the total enrichment and advancement of the business brokers who are members.
Business Cycle: A recurring pattern of expansion and contraction in the economy. The average cycle is three to four years.
Business Development: – A combination of sales and marketing techniques used to identify and cultivate new sales opportunities and revenue channels.
Business Development Strategy: - Sets out the approach for developing and cultivating new sales opportunities, either from existing customers or by proactively targeting new potential customers.
Business Enterprise: A commercial, industrial, service, or investment entity (or a combination thereof) that provides goods and/or services in pursuit of economic gains.
Business Performance Management: – A type of performance management that includes finance, covering compliance issues, competition, risk and profitability and human resources performance management encompassing employee performance appraisals and incentive compensation and other types of performance management include operational performance management and IT performance management.
Business Plan: -These comprise the Corporate, Directorate, Service and Team plans, which specify the key priorities and activities to be undertaken.
Business Prospectus: A disclosure document that provides information about an investment offering to the public, and that is required to be filed with the Securities and Exchange Commission (SEC) or local regulator. A business prospectus contains information about the company, its management team, recent financial performance, risks and other related information that investors would like to know before investing.
Business Risk: The degree of uncertainty of realizing expected future returns of the business resulting from factors other than financial leverage. See Financial Risk.
Business Valuation: A process and a set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to effect a sale of a business.
Buyer Interview: Process in which the broker learns the needs and qualifications of a potential buyer.
Business Development: C
Capital Asset Pricing Model: An element of modern portfolio theory. A mathematical model showing an "appropriate" price, based on relative risk combined with the return on risk-free assets.
Capital Asset Pricing Model (CAPM): A model in which the cost of capital for any stock portfolio of stocks equals a risk-free rate plus a risk premium that is proportionate to the systemic risk of the stock or portfolio.
Capital/Share Structure: The composition of the invested capital of a business enterprise and the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. It may also include information about stock, options, warrants and who owns or contributed them.
Capitalization: (1) the conversion of a single period of income into value (2) the capital structure of a business enterprise (3) the recognition of expenditure as a capital asset vs. a periodic expense.
Capitalization Factor: Any multiple or divisor used to convert anticipated economic benefits of a single period into value.
Capitalization of Earnings Method: A method within the income approach whereby economic benefits for a representative single period are converted to value through division by a capitalization rate.
Capitalization Rate: Any divisor (usually expressed as a percentage) used to convert anticipated economic benefits of a single period into a value.
Capitalization Ratio: Measurement of the company’s debt component of the company’s capitalization. Measures the extent of debt used in relation to the company’s permanent capital. Determined by dividing long-term debt by long-term debt plus equity
Cascading: – The process of developing aligned goals throughout an organization, connecting strategy to operations to tactics, allowing each employee to demonstrate a contribution to overall organizational objectives. Methods of cascading include identical (objectives and measures are identical), contributory (translated, but congruent, objectives and measures), unique (unique objectives and measures; do not link directly to parent) and shared (jointly-shared unique objective or measure).
Cash Basis Accounting: A method of accounting wherein income and expenses are recognized, within the statements, when the business receives the income, or pays the expense. (Also see Accrual Basis Accounting.)
Cash Consideration: The portion of the purchase price given to the target in the form of cash.
Cash Equivalents: Investment assets that can be quickly converted into cash, typically within 3 months.
Cash Flow: A business’ net income plus non-cash charges (depreciation, amortization, depletion). Can be defined (if so qualified) as before or after such items as taxes, debt service (interest only or principal & interest), or extraordinary items. (Should not be confused with net cash flow, a.k.a. free cash flow).
Cash Flow Statement: A financial statement that displays the sources and uses of cash over a period of time. The Cash Flow Statement groups together funds in all activities whether they are in “Operations,” “Financing,” or “Investments.”
Cause and Effect: – The way perspectives, objectives, and/or measures interact in a series of cause-and-effect relationships demonstrate the impact of achieving an outcome. For example, organizations may hypothesize that the right employee training (Employee, Learning and Growth Perspective) will lead to increased innovation (Internal Process Perspective), which will in turn lead to greater customer satisfaction (Customer Perspective) and drive increased revenue (Financial Perspective).
Circular merger: Companies producing distinct products seek amalgamation to share common distribution and research facilities and promoting market enlargement. The acquiring company benefits by economies of resource sharing and diversification.
Clandestine Takeover (or) Creeping Takeover: Gradual accumulation of shares with the intent of acquiring a controlling stake. One can buy up to a 5% stake in a company without any prior permission. After 5%, they should inform the stock exchange.
Client: An entity with whom a Business Broker has a fiduciary relationship.
Closing: The final steps in the sale of the business. The closing entails execution of all necessary legal documents and funding to consummate the transaction.
Closing Attorney: An attorney who assembles all of the closing documents and coordinates/facilitates the closing process. Also known as Closing Agent.
Closing Techniques: – Actions that sales people take to persuade the customer to make the necessary commitment.
Co-Brokerage: An agreement between two or more business brokers or brokerage firms for sharing the responsibilities for and the fees from the completion of a transaction.
Co-Business Broker: A business broker who shares services, responsibility and compensation on behalf of a client.
Cold Call: – The process of telephoning potential customers with whom you have no existing relationship.
Commercial Real Estate Broker: Lists and sells physical property (the real estate that a business occupies).
Committed Equity Capital: Equity investment funds readily available to an investor to make investments according to a predefined investment strategy. Related uses or terms: capital under management, capital available for investment.
Common Shares Outstanding: The number of common shares of stock outstanding at the end of the year, including stock held by the company in its treasury.
Common Size Statements: Financial statements in which each line is expressed as a percentage of the total. On the balance sheet, each line item is shown as a percentage of total assets, and on the income statement, each item is expressed as a percentage of sales. It is used to make comparisons with other similar businesses.
Common Stock: A security representing a share of ownership in a corporation.
Compensation Manipulation: One of the poor reasons to make a merger. Management compensation is according to company performance benchmarked to other companies, so an increase in the size of the company often means an increase in salary for management.
Competitive Bid: A competing offer for a company. This can be made by any person within a certain number of days of public announcement of the offer made by the acquirer. This can be made by public announcement and should be for the equal number of shares or more for which the first offer was made.
Confidential Business Review (CBR): A CBR is drafted by a brokerage firm or business broker to market a business to prospective buyers. It contains information about the business, including its products, markets, competition, and financial performance. The CBR is provided only to qualified buyers who have signed non-disclosure agreements. See Confidential Information Memorandum (CIM).
Confidential Information Memorandum (CIM): Sometimes call “the book” or pitchbook is drafted by an M&A advisory firm or investment banker for a sell-side engagement to market a business to prospective buyers. It contains financial information, including analysis of historical results and future projections. See Confidential Business Review (CBR).
Conglomerate: A merger of companies with seemingly unrelated businesses.
Conglomerate merger: An amalgamation of companies in two or more different industries.
Consolidation: The fusion of two companies in which both the companies lose their identity and form a new company. Shareholders get the shares of the new company.
Contingency: A requirement that must be met or removed before a closing can take place.
Continuing Operations: Term used in an income statement to denote recurring income as opposed to income generated by sales of assets or discontinued operations.
Control: The power to direct the management and policies of a business enterprise. Usually defined by the party/parties that own majority interest in the enterprise which may be overruled by the company’s operating or shareholder agreement.
Control Premium: An amount or a percentage by which the pro rata value of a controlling interest exceeds the pro rata value of a non-controlling interest in a business enterprise, to reflect the power of control.
Conversion Price: The price paid for a common stock that is obtained by converting either convertible bonds or preferred convertible stock
Cooperating Business Brokers: Business brokers who share their knowledge, expertise and skills for the benefit of the business brokerage profession, clients, customers and the public good. See also Co-Brokerage and Co-Business Broker.
COSATA®: Comprehensive Strategic Analysis of Transition Alternatives.
Cost Approach: A general way of determining a value indication of an individual asset by quantifying the amount of money required to replace the future service capability of that asset.
Cost of Capital: The expected rate of return that the market requires in order to attract funds to a particular investment.
Cost of Goods Sold (COGS, CGS): A grouping of those expenses applicable to the materials and labor associated directly with the goods or services delivered.
Covenants: Provisions in the legal agreements on loans, bonds, or lines of credit. Usually written by the lender to protect its position as a creditor of the borrowers
Creeping takeover: It is a slow interceptive acquisition of the controlling interest in a company by buying its shares in the stock market over a period of time.
Critical Success factor (CSF): – A CSF is a business event, dependency, product, or other factor that, if not attained, would seriously impair the likelihood of achieving a business objective. This term is always included in a glossary of strategic terms
Crown Jewels: These precious assets attract the raider to bid for the company’s control. The company sometimes sells these assets at its own initiative leaving the rest of the company intact. (Instead of selling the assets, the company may also lease them or mortgage them so that the attraction of free assets to the buyer is reduced.)
Customer: An entity to a transaction who receives services and benefits, but has no fiduciary relationship with the business broker.
Customer Avatar: - A detailed profile of your target customer.
Customer Perspective: – Measures are developed based on an organization’s value proposition in serving their target customers. In many organizations, especially public sector and non-profit, the Customer perspective is often elevated above or placed alongside the Financial perspective.
Customer Relationship Management (CRM): A technology for managing all your company’s relationships and interactions with customers and potential customers.
Customer-Facing Operations: – Encompasses those facets of the organization that interface directly with customers; typically an organization’s sales, service and marketing functions. Also referred to as Demand Chain.
Business Development: D
Dashboard: – A dashboard is a reporting tool that consolidates, aggregates and arranges measurements, metrics (measurements compared to a goal) and sometimes scorecards on a single screen so information can be monitored at a glance. Dashboards differ from scorecards in being tailored to monitor a specific role or generate metrics reflecting a particular point of view; typically they do not conform to a specific management methodology.
Dawn raid: A takeover attempt by an individual or a company in which instructions are given to buy all available shares of the target company at current market price as soon as stock exchange is opened for business on a particular date. With this base the bidder makes an attractive offer to the other sharesholders in order to make a full takeover bid.
Dead-hand Provision: The provision requires that anti-takeover defenses can only be canceled by a vote of the board, so acquirers who want to avoid the consequences of the defenses must receive approval from the board before initiating a takeover.
Debt Issuance Fees: Underwriting fees charged by investment banks to issue debt in connection with the transaction.
Debt-free: We discourage the use of this term. See Invested Capital.
Decision-Maker: – The person who makes the decision about whether to purchase your products or services.
Defensive merger: The directors of a threatened company may acquire another company for shares as a defensive measure to forestall the unwelcome takeover bid. For this purpose, they may sell a large block of shares of their own company in the hands of shareholders of a "friendly" company to make their own company least attractive for takeover bid.
Demerger by agreement: In this, the demerger takes place by an agreement with the shareholders and the creditors of the company. All the assets of the old company would be transferred to the new company and henceforth the new company would pay all the creditors.
Demerger or corporate split or division: This takes place when part of a company’s undertaking is transferred to a newly formed or an existing company. Some or that part of the shares of the first company are also transferred to the new company. The reminder of the first company’s undertaking continues to be vested in it and the share holders of the main company gets reduced by that extent.
Depreciation: Depreciation is a method of spreading the cost of an asset over a specified period of time, typically the asset’s useful life. The purpose of depreciation is to match the expense of obtaining an asset to the income it helps a company receives. Depreciation is used for tangible assets, which are physical assets such as manufacturing equipment, business vehicles, and computers. Depreciation is a measure of how much of an asset’s value has been used up at a given point in time. In an economic sense, as used in recasting of statements, a loss in value of a fixed asset as a result of wear and tear or obsolescence, which cannot be corrected by normal repairs. In accountants’ financial statements, an expense item that permits the original cost to be written off against income over the assets’ cost recovery period, as dictated from time to time by the Internal Revenue Service or GAAP. The amount of depreciation taken as a non-cash charge in any given accounting period is almost always based upon number of years approved by the IRS for cost recovery. See Amortization which is the corresponding accounting technique for intangible assets.
Dilution: The reduction of earnings, or the value of a stock, that can occur in a merger when more shares are issued; or with conversion of convertible securities into common stock.
Discontinued Operations: Operations that have been or will be discontinued by the company. These items are reported separately on the income statement
Discount: A reduction in value or the act of reducing value.
Discount for Lack of Control: An amount or percentage deducted from the pro rata share of value of 100% of an equity interest in a business to reflect the absence of some or all of the powers of control.
Discount for Lack of Marketability: An amount or percentage deducted from the value of an ownership interest to reflect the relative absence of marketability. Discounts for lack of marketability (DLOM) attempt to capture the disadvantages of owning a relatively illiquid investment without a ready market on which to trade it.
Discount for Lack of Voting Rights: An amount or percentage deducted from the per share value of a minority interest voting share to reflect the absence of voting rights.
Discount Rate: A rate of return used to convert a future monetary sum into present value.
Discounted Cash Flow Method: A method within the income approach whereby the present value of future expected net cash flows is calculated using a discount rate.
Discounted Future Earnings Method: A method within the income approach whereby the present value of future expected economic benefits is calculated using a discount rate.
Discretionary Earnings (DE): The earnings of a business enterprise prior to the following items: income taxes, non-operating income and expenses, nonrecurring income and expenses, depreciation and amortization, interest expense or income, one owner’s entire compensation, including benefits and any non-business or personal expenses paid by the business. Seller’s Discretionary Earnings (SDE) and Seller’s Discretionary Cash Flow (SDCF) and Adjusted Net are other terms used.
Divestiture: Selling of, or otherwise disposal of, a firm’s assets to achieve a desired objective, such as greater liquidity, reduced debt burden or elimination of non-core operations.
Drill Down: – A method of exploring detailed data that was used in creating a summary level of data. Drill Down levels depend on the granularity of the data in the data warehouse.
Due Diligence: A process where a buyer inspects a potential transaction. Often includes a detailed review of accounting history and practices, operating practices, customer and supplier references, management references and market reviews.
Business Development: E
Earnings: The gross operating revenues of the business less the expenses and other deductions applicable to the type of earnings you are defining: Net Income Earnings after the payment of all expenses including income taxes. See Net Earnings.
Earn-out: A contractual provision stating that the seller of a business is to obtain additional future consideration based on the business achieving certain future business goals. An earn-out is a mutually beneficial tool to completing a transaction if it is structured appropriately. Is maximizes the selling price for the seller and it matches the Company’s future earnings with the payments made to the Seller. An earn-out should not provide a financial “burden” on the Company, but should be structured as a sharing of the future earnings.
EBIT: Earnings of a business prior to interest expense or income, and prior to corporate income taxes paid. This definition recognizes interest as a cost of capital, and not as an operating expense.
EBITDA: Earnings of a business prior to interest (expense or income), income taxes, depreciation and amortization expenses.
EBITDA after Adjustments: See Adjusted EBITDA.
EBT: Earnings of the business prior to income taxes paid.
Economic Benefits: Any benefit that can be quantified in terms of the money that it generates. Net income and revenues, for example, are forms of economic benefit. Profit and net cash flow are also economic benefits. An economic benefit may also refer to a reductions in costs, such as lower raw material or labor costs.
Economic Depreciation: A measure of the decrease in value of an asset over a specific period of time.
Economic Life: The period of time over which property may generate economic benefits.
Economic Value Added (EVA): – A financial performance measure aiming to determine whether a company or activity has truly created shareholder value; in other words, EVA aims to distinguish real profit from paper profit. EVA is determined by calculating a business’s after-tax cash flow minus the cost of the capital it deployed to generate that cash flow.
Economies of Scale: Fixed costs decrease because merged companies can eliminate departments with repetitive functions.
Economies of Scope: A gain of more specialized skills or technology due to a merger.
Effective Date: See Valuation Date.
Elevator Pitch: Also known as an elevator speech. It is a short overview of a business, products, or services, and typically is used in business settings such as face-to-face networking. An elevator pitch is short and, as the name implies, delivered in the time it takes to complete a typical elevator ride.
Empire Building: One of the poor reasons to make a merger. Management decides to make a merger to increase the size of the company purely for the purpose of ego or prestige.
Employment Agreement: The traditional document used in relationships between employees and employers for the purpose of laying out the rights, responsibilities, and obligations of both parties during the employment period.
Enterprise: See business enterprise.
Enterprise Value: Enterprise value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company’s balance sheet. EV is a popular metric used to value a company for a potential takeover.
Equity: Also known as shareholders’ equity, which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all company debt were paid off.
Equity Carve Out: <>A type of divestiture -- different to spin off. Effectively an IPO of some portion of equity stock of a wholly owned subsidiary by the parent company. Some of the subsidiary’s shares are offered for sale to general public to raise funds cash inflow without losing control. Also called a split off IPO.
Equity Issuance Fees: Underwriting fees charged by investment banks to issue equity in connection with the transaction.
Equity Net Cash Flows: Those cash flows available to pay out to equity holders (in the form of dividends) after funding operations of the business enterprise, making necessary capital investments, and increasing or decreasing debt financing.
Equity Risk Premium: A rate of return added to a risk free rate to reflect the additional risk of equity instruments over risk free instruments (a component of the cost of equity capital or equity discount rate).
Escrow: Third-party arrangement to hold and distribute funds (usually by an attorney); agreed upon by both the buyer and the seller.
Excess Earnings: That amount of anticipated economic benefits that exceeds an appropriate rate of return on the value of a selected asset base (often net tangible assets) used to generate those anticipated economic benefits.
Excess Earnings Method: A specific way of determining a value indication of a business, business ownership interest, or security determined as the sum of a) the value of the assets derived by capitalizing excess earnings, and b) the value of the selected asset base. Also frequently used to value intangible assets.
Excess Purchase Price: The value of the purchase price over and above the net book value of assets (total purchase price minus the net book value of assets).
Exclusive Agency: Agency agreement that gives only one broker or brokerage firm the right to sell the business.
Exercise Price: The price at which an option may be exercised. This is also known as the strike price.
Exit Plan: A strategy to depart an existing situation. The creation of an overall strategy that prepares a business owner and his/her company for the time when that business owner is no longer involved in the operation of the company. Examples of unplanned exits include death, divorce, management disputes, influx of competition, technological obsolescence, loss of a major customer, or other unforeseen economic events.
Business Development: F
Factum: A de-identified summary of a business opportunity designed to qualify a prospective purchaser’s initial interest in a business for sale.
Fair Market Value: The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.
Fair Value Adjustments: The increase or decrease in the net book value of assets to arrive at the fair market value.
Fairness Opinion: An opinion as to whether or not the consideration in a transaction is fair from a financial point of view.
Family Succession: In a family succession or retirement transition, ownership transfers from current owners to other family members. Facilitators are particularly sensitive to estate planning issues, family business dynamics and the need for discretion and trust to makes these transaction seamless and successful.
FIFO (First In First Out): An accounting method of valuing inventory, based on the assumption that the “first” unit of an item of inventory purchased (the oldest) is the first unit sold out of inventory. In pricing, the inventory under this valuation method the ending inventory is the aggregate of the cost of the newest, most recently purchased units of each item.
Financial Perspective: – The perspective that looks at bottom line results. In public sector and non-profit organizations, the Financial Perspective is often viewed within the context of the constraints under which the organization must operate.
Financial Risk: The degree of uncertainty of realizing expected future returns of the business resulting from financial leverage. See Business Risk.
Finder’s Fee: An amount paid to another party for locating and referring a client or customer. Also known as a “referral fee.”
Fiscal year: Annual period of time to which a business adheres for financial reporting.
Flip-in: Target company’s shareholders can purchase more shares of its stock at a discount. This dilutes the stock, making it more expensive and difficult for a potential acquirer to obtain a controlling equity interest (more than 50% of voting shares).
Flip-over: Target company’s shareholders can buy the post-merger (acquirer) company’s stock at a discount. Target company is counterattacking by diluting the acquirer’s stock.
Forced Liquidation Value: Liquidation value, at which the asset or assets are sold as quickly as possible, such as at an auction. Because of insufficient time to sell on the open market, Liquidation Value is typically lower than Fair Market Value.
Forecast: – Forecast usually refers to a projected value for a metric. Organizations will often create a forecast that is different than their target for a given metric. There are multiple types of forecasting methods for creating forecasts based on past data and usage of them varies widely across organizations.
Forward integration: It is a process by which a company acquires another company that make use of its products to manufacture finished goods. This type of acquisition can go up to the point of retail outlets.
Free Cash Flow: We discourage the use of this term. See Net Cash Flow.
Friendly mergers: Mergers and acquisitions resulting from negotiations, with the willing consent of the acquiree company.
Friendly Takeover: The board of directors and management of the target company approve of the takeover. They will advise the shareholders to accept the offer.
Fully Diluted Shares Outstanding: The number of shares a company has outstanding after options, convertible securities, etc., are exercised.
Business Development: G
Goal: – An observable and measurable end result having one or more objectives to be achieved within a more or less fixed time-frame
Goal Diagram: – Generically used to describe the one-page visualization that shows the different goals of the organization and how they are related. Examples of goal diagrams include strategy plans, strategy maps and process diagrams.
Godfather offer: A takeover offer so attractive that the target company can not refuse. Usually this type of takeovers result in a change of the management team. Shareholders too, sometimes have reasons to assume that the takeover will serve some ulterior motive of the predator (such as asset stripping, transfer of reserves) rather than uphold their interest. A godfather offer has none of these nasty implication.
Going Concern: An ongoing, operating business enterprise.
Going Concern Value: The value of a business enterprise that is expected to continue to operate into the future. The intangible elements of Going Concern Value result from factors such as having a trained work force, an operational plant, and the necessary licenses, systems and procedures in place.
Golden parachute: An employment contract offered to company directors and senior management which guarantees to pay extensive benefits if the executives is made to leave the company. Such contacts are offered to make unfriendly takeovers expensive.
Golden Parachutes (or) First Class Passengers Strategy: This envisages a generous termination package for senior executives and is used as a protection tool against a takeover.
Goodwill: A) Those elements of a business that cause customers to return in sufficient volume to generate profit in excess of a reasonable return on tangible assets. B) That intangible asset that arises as a result of name, reputation, customer patronage, location, products and similar factors that have not been separately identified and/or valued but which generate economic benefits.
Goodwill Value: The value of a business attributable to goodwill.
Greenmail: To buy a large number of shares of a company with either of the two motives; to sell them at a higher rate to a corporate raider, or to offer them to the company for a similar profit. An offer which the management will find hard to refuse as its sale to the raider will threaten its existence.
Grey knight: A takeover bidder whose intentions are unclear. He is neither a welcome bidder known as the white knight nor clearly an unwelcome bidder, known as the black knight.
Gross Profit: That portion of net sales that remains after the subtraction of the COGS. See Cost of Goods Sold.
Growth Capital: An investment made in an operating company by an investor to support existing or anticipated expansion of the business. May or may not include a change of equity control but frequently involves the exchange of equity ownership. Also called expansion capital or growth equity.
Guideline Public Company Method: A method within the market approach whereby market multiples are derived from market prices of stocks of companies that are engaged in the same or similar lines of business, and that are actively traded on a free and open market.
Business Development: H
Hired gun: An expert who is hired by a takeover target company to fight off a predator.
Holding company: The holding company would have more than 50% of the total voting power and has the control on the other company.
Horizontal Integration: Merging of companies in the same lines of business. Usually to achieve synergies.
Horizontal merger: It is a merger of two competing firms, which are at same stage of industrial process.
Hostile takeover: Takeover of a company by an individual, a group or another company which is not welcomed or approved by the management of the target company or its corporate philosophy. Such a takeover is resisted by the target company, using many ploys like the golden parachute, poison pill, or shark repellent.
Hostile takeovers: An acquirer may not offer the proposal to acquire the target company’s undertaking, but may silently and unilaterally pursue efforts to gain controlling interest in it against the wishes of the management. They are also called raids or takeover raids.
House of Issue: The investment bank that underwrites and floats a security issue.
Human Capital: – A metaphor for the transition in organizational value creation from physical assets to the capabilities of employees. Knowledge, skills, and relationships, for example. Closely related to terms such as intellectual capital and intangible assets. Some experts suggest that as much as 75% of an organization’s value is attributable to human capital.
Business Development: I
Identifiable Assets: An asset that can be assigned a fair value; can include both tangible and intangible assets.
Income: See Earnings.
Income (-based) Approach: A general way of determining a value indication of a business, business ownership interest, security or intangible asset using one or more methods that convert anticipated economic benefits into a present single amount.
Income Statement: A financial statement that is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period, with the other two key statements being the balance sheet and the statement of cash flows. The income statement primarily focuses on the company’s revenues and expenses during a particular period. Also known as the profit and loss statement, P&L, or the statement of revenue and expense.
Industry Comparison: Weighted Average Method. Valuation method that uses statistics from comparable businesses.
Industry Risk: Represents how the market perceives the risk of a specific industry compared to the market as a whole.
Influencer: – Influencers are people that affect a sale but are not the ultimate decision-maker.
Initiatives: – Initiatives organize people and resources and dictate which activities are required to accomplish a specific goal by a particular date; initiatives provide the how while goals provide the what. As differentiated from projects, initiatives directly support an organization’s strategic goals; projects may or may not have strategic impact.
Inputs: – Commonly used within the Logic Model to describe the resources an organization invests in a program, such as time, people (staff, volunteers), money, materials, equipment, partnerships, research base, and technology, among other things.
Insider Trading: In some countries it is a criminal offence for an individual to trade based upon insider information -- someone who is an insider by virtue of being connected with the company and has access to price sensitive information which other share holders do not have.
Intangible Assets: Non-physical assets such as franchises, trademarks, patents, copyrights, goodwill, equities, mineral rights, securities and contracts (as distinguished from physical assets) that grant rights and privileges and have value for the owner.
Intangibles: All intangible assets like goodwill, patents, trademarks, unamortized debt discounts and deferred charges
Intellectual Property: Intellectual property is a broad categorical description for the set of intangible assets owned by a company and legally protected from outside use or implementation without consent. Intellectual property can consist of patents, trade secrets, copyrights, and trademarks or simply ideas. The concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protective rights that apply to physical property.
Interlocking shareholdings or Cross Shareholdings: Two or more group companies acquire shares of each other in large quantity or one company may distribute shares to the share holders of its group company to avoid threats of takeover bids. (If the interlocking of shareholdings is accompanied by joint voting agreement then the joint system of defence is termed "Pyramiding".)
Intermediary: An advisor who assists buyers and sellers of privately held small business throughout the business transfer transaction process. An agency relationship typically exists between the intermediary and either the buyer or seller. The intermediary offers transaction advisory services such as estimating the value of the business; advertising it for sale with or without disclosing its identity; managing the initial buyer/seller interviews, discussion and negotiations; facilitating the progress of the due diligence investigation and generally assisting with the business sale. Intermediaries require special skills – financial analysis, excellent verbal and written communication skills. For businesses selling below about $2 million, the intermediary is often referred to as a business broker. For businesses selling above $5 million, the intermediary may be referred to as a Merger and Acquisition (M&A) advisor or an investment banker (I-banker).
Internal Process Perspective: – Internal Process Perspective: The perspective used to monitor the effectiveness of key processes at which the organization must excel in order to achieve its objectives and mission.
Internal Rate of Return: A discount rate at which the present value of the future cash flows of the investment equals the cost of the investment.
Intrinsic Value: The value that an investor considers, on the basis of an evaluation or available facts, to be the “true” or “real” value that will become the market value when other investors reach the same opinion. When the term applies to options, it is the difference between the exercise price or strike price of an option and the market value of the underlying security.
Invest Capital Net Cash Flows: Those cash flows available to pay out to equity holders (in the form of dividends) and debt investors (in the form of principal and interest) after funding operations of the business enterprise and making necessary capital investments.
Invested Capital: The sum of equity and debt in a business enterprise. Debt is typically a) all interest-bearing debt, or b) long-term interest-bearing debt. When the term is used, it should be supplemented by a specific definition in the given valuation context.
Investment Analysis: Investment analysis is a broad term encompassing many different aspects of evaluating financial assets, sectors, and trends. It can include analyzing past returns to predict future performance, selecting the type of investment instrument that best suits an investor’s needs, or evaluating securities such as stocks and bonds, or a category of securities, for risk, yield potential or price movements. Investment analysis is key to any sound portfolio management strategy.
Investment Banker: An individual who works in a financial institution that is in the business primarily of raising capital for companies, governments and other entities or who works in a large bank’s division that is involved with these activities. Investment bankers may also provide other services to their clients such as mergers and acquisitions advice or advice on specific transactions, such as spinoff or reorganization. In smaller organizations that do not have a specific investment banking arm, corporate finance staff may fulfill the duties of investment bankers. Investment bankers require specific skills – financial analysis, excellent verbal and written communication skills.
Investment Risk: The degree of uncertainty as to the realization of expected returns.
Investment Value: The value to a particular investor based on individual investment requirements and expectations.
IT Performance Management: – A type of performance management that assists organizations with the increasing demands of maximizing value creation from technology investments; reducing risk from IT; decreasing architectural complexity; and optimizing overall technology expenditures. Other types of performance management include operational performance management and business performance management.
Business Development: J
Joint Holding or Joint voting agreement: Two or more major shareholders may enter into agreement to block voting or to block sale of shares or may sell the shares together. This agreement is entered into with the cooperation of Offeree Company’s management.
Joint Venture: This is an agreement between two or more companies to create a jointly owned company, where there will be an agreed contribution and participation of the respective companies.
Junk Bond: A bond that is rated "below investment grade," involving greater than usual risk as an investment and pays a relatively high rate of interest, typically issued by a company lacking an established earnings history or having a questionable credit history. Junk bonds are used to help finance the purchase of companies, especially by leveraged buyouts.
Business Development: K
Key Outcome Indicator (KOI): – Often used in the public sector to describe key performance indicators, those metrics most critical to gauging progress toward objectives. KOIs are metrics that are: tied to an objective; have at least one defined time-sensitive target value; and have explicit thresholds which grade the gap between the actual value and the target.
Key Performance Indicator (KPI): – Distinguished from other metrics, key performance indicators (KPIs) are those metrics most critical to gauging progress toward objectives. KPIs are metrics that are: tied to an objective; have at least one defined time-sensitive target value; and have explicit thresholds which grade the gap between the actual value and the target.
Key Person Discount: An amount or percentage deducted from the value of an ownership interest to reflect the reduction in value resulting from the actual or potential loss of a key person in a business enterprise.
Killer bees: Law firms, public relations firms, and investment bankers employed by a target company to fend off unfriendly takeover.
Business Development: L
Lagging Indicator: – Backward-looking performance indicators that represent the results of previous actions. Characterizing historical performance, lagging indicators frequently focus on results at the end of a time period; e.g., third-quarter sales. A balanced scorecard should contain a mix of lagging and leading indicators.
Leading Indicator: – Forward-looking in nature, leading indicators are the drivers of future performance. Improved performance in a leading indicator is assumed to drive better performance in a lagging indicator. For example, spending more time with valued customers (a leading indicator) is hypothesized to drive improvements in customer satisfaction (a lagging indicator).
Learning and Growth Perspective: – May also be termed “Skills and Capability.” Measures in this perspective are often considered enablers of measures appearing in other perspectives; therefore, this perspective is often placed at the bottom or foundation of a strategy plan. Employee skills and training, availability of information, and organizational culture are often measured in this perspective. More latterly, this perspective has included ‘Capacity’ to indicate that it is concerned with more than the human aspect and all includes other physical resources.
Leveraged Buyout: This is the acquisition of a company by its management personnel. It is also known as management buyout. Management may raise capital from the market or institutions to acquire the company on the strength of its assets.
Leveraged Buyout (LBO): The acquisition of a business utilizing equity or investment capital and third-party debt financing. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital. Typically includes a change of control or change of ownership.
Levered Beta: The beta reflecting a capital structure that includes debt.
LIFO (Last In First Out): An accounting method of valuing inventory, based on the assumption that the “last”, most recent, unit of an item of inventory purchased is the first unit sold out of inventory. In pricing the inventory under this valuation method the ending inventory is the aggregate of the cost of the oldest units of each item, purchased within the accounting period.
Limited Appraisal/Valuation: The act or process of determining the value of a business, business ownership interest, security, or intangible asset with limitations in analysis, procedures, and scope.
Liquidation Value: The net amount that would be realized if the business is terminated and the assets are sold piecemeal. Liquidation can be either “orderly” or “forced.”
Liquidity: The ability to quickly convert property to cash or pay a liability. Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market at a price reflecting its intrinsic value.
Listing Amendment: Addresses a change made to the original listing. Also called a Listing Addendum.
Loan Assumption: Occurs when the buyer assumes all of the rights and obligations of a debt currently in the name of the seller.
Lobster trap: The anti-takeover strategy that involves restrictions in the charter on the acquisition of voting stock by individuals with a large percentage of the convertible securities, named for the trap that is designed to hold large lobster, while permitting small ones to escape. In particular, stipulating that a convertible debenture holder can not convert his debentures into equity shares if he already holds, or going to hold as a result of the conversion, 10% or more of the company's equity shares.
Logic Model: – Having gained prominence in the ’90s largely in response to the Government Performance and Results Act (GPRA), the Logic Model is now a widely accepted management tool in the public and non-profit sectors as well as the international arena. The model is a roadmap or picture of a program that shows the logical relationships among resources or inputs (what an organization invests); activities or outputs (what an organization gets done); and outcome-impacts (what results or benefits happen as a consequence).
Long-term Debt: The debt due to be paid at a date more than one year in the future. Also, the loans and obligations with a maturity of longer than one year; usually accompanied by interest payments. From a business owner’s perspective Long Term Debt Financing usually applies to assets the business is purchasing, such as equipment, buildings, land, or machinery.
Lower Middle Market (LMM): The lower end of the middle market segment of the economy, as measured in terms of annual revenue of the firms. Firms with an annual revenue in the range of $5 million to $50 million are grouped under the lower middle market category.
Business Development: M
M&A: Merger and acquisitions.
M&A Glossary – Hostile Takeover DefensesCrown Jewels Defense: Target selling the most valuable parts of the company (crown jewels) if a hostile takeover occurs. This deters acquirers from pursuing the hostile takeover.
M&A Glossary – Takeover StrategiesBlack Knight: An unwelcome takeover bidder.
Majority Control: The degree of control provided by a majority position.
Majority Interest: An ownership interest greater than 50% of the voting interest in a business enterprise.
Malcolm Baldridge: – Established by the U.S. Congress in 1987, the Malcolm Baldridge performance framework is a rating tool that assesses management systems and helps identify major areas for improvement in seven categories of performance criteria: Leadership; Strategic Planning; Customer and Market Focus; Measurement, Analysis, Knowledge Management; Human Resource Focus; Process Management; and Business Results.
Management Buy-in: Financing an outside manager or management team to acquire a target company. In a management buy-in (MBI) an external management team partners with a company that has a management void. This could be a private company, a stand-alone company or an orphaned division of a larger company. Managers retain operational control while holding significant equity. This type of action can occur when a company appears to be undervalued, poorly managed or requires succession.
M:anagement Buy-out A process whereby management of a company acquires all or some of the ownership of the company they manage either independently or in partnership with a private equity fund/group (PEG). Management buy-outs (MBO) are generally pursued by management teams that have little or no ownership in a business and want to obtain more ownership but lack the financial resources to buy the company from the current owners. In these circumstances, a PEG can provide the financing necessary to facilitate the purchase of the business. The PEG also gives the management team a large equity stake to cement their commitment to continue running the business.
Mandatory Bid: Once the acquiror has accumulated a certain percentage of shares, stock exchange regulations may require that the bidder make an offer for the remainder of the shares.
Market (-Based) Approach: A general way of determining a value indication of a business, business ownership interest, security or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities or intangible assets that have been sold.
Market Capitalization of Equity: The share price of publicly traded stock multiplied by the number of shares outstanding.
Market Capitalization of Invested Capital: The market capitalization of equity plus the market value of the debt component of invested capital.
Market Multiple: The market value of a company’s stock of invested capital divided by a company measure (such as economic benefits, number of customers).
Market Value Invested Capital (MVIC): Also known as the selling price, the MVIC is the total consideration paid to the seller and includes any cash, notes and/or securities that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer.
Marketability: The ability to quickly convert property to cash at minimal cost.
Marketability Discount: See Discount for Lack of Marketability.
Measure: (also called metric) – Term to describe a standard used to communicate progress on a particular aspect of a program. Measures typically are quantitative in nature, conveyed in numbers, dollars, percentages, etc. (e.g., $ of revenue, headcount number, % increase, survey rating average, etc.) though they may be describing either quantitative (e.g., sales made) or qualitative (e.g., employee motivation) information.
Megabid: A very large takeover bid.
Merchant Banker: The arranging bank -- middle men in settling negotiations for merger or takeover between the offeree and offeror.
Merger: An amicable involvement of two or more companies to form one unit, and to increase overall efficiency. The shareholders of merged companies are offered equivalent holdings in the new company, and old employees are generally retained. Takeovers, which are quite another matter, generate a lot more heat. A horizontal merger combines direct competitors in the same products and markets, while a vertical merger combines suppliers and the company or customers and the company.
Merger and Acquisition Method: A method within the market approach whereby pricing multiples are derived from transactions of significant interests in companies engaged in the same or similar lines of business.
Merger/Statutory: The purchasing company acquires all of the target company shares/assets; the target company ceases to exist (acquirer survives).
Metric: (also called measure) – A framework to establish and collect measurements of success/failure on a regulated, timed basis that can be audited and verified. The term used in commercial organizations to describe a standard used to communicate progress on a particular aspect of the business. Measures typically are quantitative in nature, conveyed in numbers, dollars, percentages, etc. (e.g., $ of revenue, headcount number, % increase, survey rating average, etc.) though they may be describing either quantitative (e.g., sales made) or qualitative (e.g., employee motivation) information.
Mid-Year Discounting: A convention used in the Discounted Future earnings Method that reflect economic benefits being generated at midyear, approximating the effect of economic benefits being generated evenly throughout the year.
Milestone: – The set of specific deadlines or hurdles that signal progress in completing an Initiative. Milestones include progress/completion dates or % completion rates, key presentations/meetings, and key decision points.
Minority Discount: A discount for lack of control applicable to a minority interest.
Minority Interest: An ownership interest less than 50 percent of the voting interest in a business enterprise.
Mission: – Concise statement that describes, in motivating and memorable terms, the current top-level strategic goal of the organization. A mission provides both an internal rallying cry and external validity. Usually financial-, process-, or customer service-oriented, with a mid-term (three to five years) horizon, an effective mission is inspiring as well as easily understood and communicated.
Mission Statement: – A mission statement defines the core purpose of the organization ‐ why it exists. The mission examines the “raison d’etre” for the organization beyond simply increasing shareholder wealth, and reflects employees’ motivations for engaging in the company’s work. Effective missions are inspiring, long‐term in nature, and easily understood and communicated.
Most Probable Selling Price: That price for the assets intended for sale which represents the total consideration most likely to be established between a buyers and seller considering compulsion on the part of either buyer or seller, and potential financial, strategic or non-financial benefits to seller and probable buyer.
Multiple: Also known as Enterprise Value (EV) Multiple, is the inverse of the capitalization rate. It is usually the ratio of the price to earnings, particularly for public companies. It can also be the ratio of selling price to discretionary earnings (DE) for a small business. A multiple can be used to estimate the value of a company. Most often, however, a multiple is a generated value as an outgrowth of the valuation of a business.
Business Development: N
Net Book Value: With respect to a business enterprise, the difference between total assets (net of accumulated depreciation, depletion, and amortization) and total liabilities as they appear on the balance sheet (synonymous with Shareholder’s Equity). With respect to a specific asset, the capitalized cost less accumulated amortization or depreciation as it appears on the books of account of the business enterprise.
Net Book Value of Assets: Book value of assets minus book value of liabilities.
Net Cash Flow: This is the net income plus all non-cash charges (depreciation, amortization and depletion), less amounts needed for capital expenditures, plus/minus net change in working capital, plus/minus changes in debt. (This would be net cash flow for equity.) Invested capital net cash flow would exclude the net change in debt and adjust net income to include interest expense, net of tax.
Net Earnings: Refers to after-tax net income, sometimes known as the bottom line or a company’s profits. Net Earnings are the main determinant of a company’s share price, because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the long run. See Earnings.
Net Present Value (NPV): The value, as of a specified date, of future cash inflows less all cash outflows (including the cost of investment) calculated using an appropriate discount rate. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.
Net Profit: Total revenues less all expenses and other deductible items. Should be identified as pre-tax or post tax.
Net Tangible Asset Value: The value of the business enterprise’s tangible assets (excluding excess assets and non-operating assets) minus the value of its liabilities.
Net Worth: Total assets minus total liabilities, as reflected by the balance sheet. Synonymous with net book value or owner’s equity.
Networking: The exchange of information and ideas among people with a common profession or special interest, usually in an informal social setting.
Networking Groups: - Structured meetings where like-minded business people meet regularly with the intention of passing each other referrals.
Nondisclosure Agreement (NDA): Document that requires all information about a business to be kept confidential; also referred to as a confidentiality agreement.
Non-operating/Non-contributing Asset: An asset unnecessary to the operation of a business enterprise and the generation of its revenues.
Normalized Earnings: Economic benefits adjusted for non-recurring, non-economic, or other unusual items to eliminate anomalies and/or facilitate comparisons.
Normalized Financial Statements: Financial statements adjusted for non-operating assets and liabilities and/or for nonrecurring, non-economic or other unusual items to eliminate anomalies and/or facilitate comparisons.
Business Development: O
Objective: – A concise statement describing specific, critical, actionable and measurable things an organization must do in order to effectively execute its strategy and achieve its mission and vision. Objectives often begin with action verbs such as increase, reduce, improve, achieve, etc. Whereas the vision and mission statements provide an organizing and mobilizing “rallying cry,” objectives translate the vision and mission into measurable and actionable operational terms.
Objective or Outcome Scorecard: – A specific application of a scorecard/objective scorecards monitor progress toward a given set of objectives or outcomes using a threshold-based rating scale. Typically, objective status is determined by normalizing one or many key performance indicators and comparing it to a given rating scale.
Offer Price: The price offered per share by the acquirer.
Offering Memorandum: A summary of the major details of a business for sale including financials, marketing and sales, employees, customers, suppliers and competitors.
Open Listing: An Agreement between a seller and a broker that defines the terms and commissions that the broker would receive upon selling a business or property. However, unlike an Exclusive Right to Sell agreement, this agreement is non-exclusive. Any other broker may also enter into a similar non-exclusive agreement with the seller. The broker who brings in the winning buyer for the property collects a commission.
Open-Ended Contract: Contract with no expiration date.
Operational Alignment: – The means to and/or state of alignment of an organization’s day-to-day activities with its strategic goals or objectives, operational alignment helps ensure that an organization’s daily activities are advancing its longer-term goals and mission.
Operational Performance Management: – A type of performance management that addresses the growing pressure to increase revenue while managing costs, while meeting ever-evolving and expanding customer demands. Other types of performance management include business performance management and IT performance management.
Operational Reviews: – Usually used to describe the regularly scheduled internal status meetings of an organization. Going by different names based on the organization, manufacturing companies typically call them Operational Excellence (OPX) meetings, other organizations sometimes just refer to them as Performance reviews.
Orderly Liquidation Value: Liquidation value at which the asset or assets are sold over a reasonable period of time to maximize proceeds received.
Other Closing Costs: This may include due diligence fees, legal fees, accounting fees, etc., related to the deal.
Outcome: – Commonly used within the Logic Model, outcomes (also called outcome-impacts) describe the benefits that result as a consequence of an organization’s investments and activities. A central concept within logic models, outcomes occur along a path from shorter-term achievements to medium-term and longer-term achievements. They may be positive, negative, neutral, intended, or unintended. Examples of outcomes include changes in knowledge, skill development, behaviour, capacities, decision-making, and policy development.
Output: – Commonly applied within the Logic Model, outputs describe what an organization gets done; e.g., “what we do” or “what we offer” and may include workshops, delivery of services, conferences, community surveys or facilitation.
Owner: A generic term used in business brokerage to represent the proprietor, general partner or controlling shareholder (singular or plural as appropriate) of a business enterprise.
Owner Total Compensation: Total of an owner’s salary and perquisites, after the compensation of all other owners has been adjusted to market value.
Owner’s Salary: The salary or wages paid to the owner, including related payroll burden.
Ownership: A generic term used mean 100% controlling ownership; whether or not incorporated, and without the distinction that the owner of an unincorporated business owns the business’ assets, while the owner of a corporation owns the stock of the corporation – that owns the assets. Business ownership refers to the control over an enterprise, providing the power to dictate the operations and functions.
Business Development: P
Pac Man Defense: Target company of a hostile takeover turns around and attempts to obtain controlling shares of the acquirer.
Pac-Man defence: A strategy of survival in the takeover game, named after a popular game in the US in the early 1980s, in which a character which does not swallow its opponents is itself consumed. In a typical Pac-man defence a target company in the takeover bid will threaten to take over the acquirer and start buying its shares.
Pac-Man Strategy: The target company attempts to take over the hostile raider.
Par Value: The face value of a bond. Also, the arbitrary value given to the stock by the issuing company. This figure is relatively meaningless since the current value of a stock is its price established in the market, regardless of its stated par value.
Parent company: A company which owns or controls subsidiary companies by means of owning a majority of voting shares. A parent company usually has a business of its own.
Partial Bid: When a bid is made for acquiring part of the shares of a class of capital where the offeror intends to obtain effective control. This is made for the equity shares.
Performance Driver: – Measures that indicate progress against a process or behaviour. These measures are helpful in predicting the future outcome of an objective.
Performance Gap: – The “difference” between actual and target, the trend of the performance or target gap shows an organization’s momentum.
Performance-Based Budgeting: – A performance budget is an integrated annual performance plan and budget that shows the relationship between program funding levels and expected results. It indicates that a goal or a set of goals should be achieved at a given level of spending.
Perspective: – Representing the various stakeholders, internal and external, critical to achieving an organization’s mission. Together, the perspectives provide a holistic, or balanced, framework for telling the “story of the strategy” in cause-and-effect terms. While the traditional Balanced Scorecard includes the four perspectives of Financial, Customer, Internal Process, and Employee Learning and Growth, an organization may choose to modify and/or add to these to adequately translate and describe their unique strategy.
Plant/Assets Ratio: The percentage of total assets that is tied up in land, buildings and equipment.
Points of Difference: – Similar to USPs but are not necessarily unique.
Poison pill: Defence strategy adopted by the target company. The company makes the takeover less attractive by such means as issuing fresh preference shares with the provision that in the event of a takeover the preference shareholders can redeem their shares at a high premium, making the cost of takeover quite unattractive.
Poison Pill strategy: The target company might issue convertible securities which are converted into equity to deter the efforts of offeror; such conversion dilutes the bidder’s shares and discourages acquisition. Or the target company might raise borrowings distorting normal debt: equity ratio.
Poison Put: Target companies allow bondholders to sell bonds back at a premium to make hostile takeovers costlier.
Portfolio Discount: An amount or percentage deducted from the value of a business enterprise to reflect the fact that it owns dissimilar operations or assets that do not fit well together.
PPerquisites: Special additional benefits received because of an employment position. In closely-held businesses these are often a result of the business’ ability to pay for them, more than a result of market rate compensation for the services provided to the business. Perquisites are commonly referred to as “perks.” Perks include items such as company paid vehicles, insurance, travel, memberships, salary in excess of market rate, bonuses, etc.
Predator: A person, a group, or a company seeking to take over another company, known as the target company.
Premise of Value: An assumption regarding the most likely set of transactional circumstances that may be applicable to the subject valuation; e.g., going concern, liquidation.
Present Value: The value, as of a specified date, of future economic benefits and/or proceeds from sale, calculated using an appropriate discount rate.
Price/Earnings Multiple: The price of a share of stock divided by its earnings per share.
Principle of Substitution: A buyer will pay no more than that which he/she would have to purchase an equally desirable substitute.
Private Equity: An investment in non-public securities. Also, an investment asset class typically reserved for large institutional investors, such as pension funds and endowments, as well as high net worth individuals. Includes investments in privately held companies, ranging from start-up companies to well established and profitable companies, to bankrupt or near bankrupt companies. Examples of private equity include venture capital, leveraged buyout, growth capital and distressed investments.
Private Equity Fund: An investment vehicle, typically a Limited Partnership, formed to make investments in private companies via a pool of available equity capital.
Pro Forma Shares Outstanding: The number of shares outstanding after the transaction has closed and additional equity has been issued.
Process Diagram: – Process diagrams typically are used to represent specific processes that are undertaken in an organization and the key steps involved in the process. An example might be a high-level diagram that highlights the customer experience.
Profit and Loss (P&L) Statement: See Income Statement.
Proforma Financial Statements: In business, these financial statements are prepared in advance of a planned transaction, such as a merger, an acquisition, a new capital investment, or a change in capital structure such as incurrence of new debt or issuance of equity.
Program Assessment Rating Tool: – Developed by the Office of Management and Budget within the Office of the President of the United States, the Program Assessment Rating Tool (PART) was developed to assess and improve program performance so that the federal government can achieve better results. A PART review helps identify a program’s strengths and weaknesses to inform funding and management decisions aimed at making the program more effective. The PART therefore looks at all factors that affect and reflect program performance including program purpose and design; performance measurement, evaluations, and strategic planning; program management; and program results.
Proxy Battles: They take place when the agenda items at the meeting are likely to be opposed by dissident shareholders. Management of the company collect proxies to face these opponents in the meeting of Board of Directors.
Purchase Price Allocation: The breakdown of the total purchase price between net identifiable assets and goodwill.
Business Development: Q
Qualifying Questions: – Questions used to establish whether a prospect is likely to buy from you. Prospects are often qualified based on the acronym BANT - Budget, Authority, Needs, and Timeline.
Qualitative: – Subjective, as opposed to quantitative (measured). A common source of qualitative metrics are surveys of customers, stakeholders or employees.
Quality of Earnings: The quality of earnings refers to the proportion of income attributable to the core operating activities of a business. The amount of earnings attributable to higher sales or lower costs has higher quality, rather than artificial profits created by accounting anomalies such as inflation of inventory. Quality of earnings may be considered poor during times of high inflation. Also earnings that are calculated conservatively are considered to have higher quality than those calculated by aggressive account policies. A key characteristic of high-quality earnings is that the earnings are readily repeatable over a series of reporting periods, rather than being earnings that are only reported as the result of a one-time event.
Quantitative: – Measured, as opposed to qualitative (subjective). Quantitative measures often come from transactional systems.
Quick (Asset) Ratio: A liquidity measure: cash plus cash equivalents plus trade receivables divided by total current liabilities. Also known as the acid test ratio. It is a more stringent measure of short-term liquidity than the current ratio because it excludes inventories from current assets (which presumes that current liabilities cannot be paid with inventory).
Business Development: R
Radar alert: Close monitoring of the stock market activity in a company's shares by a shark watcher appointed by the company for that purpose. The watcher will keep stock of the buying/selling of the company's shares and determine if an accumulation is taking place. If such a thing begins to happen the company is immediately alerted so that it can take suitable defensive measures.
Raider: A takeover artist, who may be an individual or corporate body by buying a controlling interest of shares in a target company, runs it his way, by appointing a new management team, and formulates a new set of policies.
Rate of Return: An amount of income (loss) and/or change in value realized or anticipated on an investment, expressed as a percentage of that investment.
Ratio Analysis: A ratio analysis is a quantitative analysis of information contained in a company’s financial statements used to evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability and solvency.
Readiness Scorecard: – A specific application of a scorecard, a readiness scorecard can be used to evaluate an organization’s state of readiness/acceptance of a given strategy.
Recapitalization: A financing transaction that allows owners to harvest some of the value they have created in their company while retaining a large ownership stake in the business going forward. For example, recapitalization can involve exchanging one type of financing for another – debt for equity or equity for debt – or when a company issues debt to buy back its equity shares.
Reconstruction: In this, a company transfers its undertaking and its assets to a new company in consideration of the issue of the new company’s shares to the first company’s members. And if the first company members debentures are not paid off, the new company should give the debentures to the respective holders and thus the first company would lose its identity.
Redundant Assets: See Non-Operating Assets.
Replacement Cost New: The current cost of a similar new property having the nearest equivalent utility to the property being valued.
Report Date: The date conclusions are transmitted to the client.
Reports: – Typically show the details of performance for a metric or multiple metrics. Reports are often used to drill down to the root cause of performance issues.
Reproduction Cost New: The current cost of an identical new asset or property.
Required Rate of Return: The minimum rate of return acceptable by investors before they will commit money to an investment at a given level of risk.
Reserve For Replacement: A financial provision for recognizing the reduction in value of assets over their estimated useful life. This is done by making regular additions to a fund sufficient to meet the estimated cost of additions to and replacements of the fixed assets when they come to the end of their useful life. The useful life could end due to wear, or becoming obsolete. This reserve is seldom “actually” money set aside for when needed. In concept, the reserve for replacement is similar to the charge for depreciation.
Residual Value: The prospective value as of the end of the discrete projection period in a discounted benefit streams model. It is also the amount that a company expects to receive for an asset at the end of its service life less any anticipated disposal costs.
Restructuring Charges: Any fees or charges related to early debt repayments that are part of a restructuring.
Return on Equity: The amount, expressed as a percentage, earned on a company’s common equity for a given period.
Return on Invested Capital: The amount, expressed as a percentage, earned on a company’s total capital for a given period.
Return on Investment: See Return on Invested Capital and Return on Equity.
Revenue Enhancements: Increases in revenue that are expected due to cross-selling, up-selling, pricing changes, etc.
Reverse takeover: In which, a small company takes over a large company or a private company takes over a public company.
Risk Premium: A rate of return added to a risk-free rate to reflect risk.
Risk-Free Rate: the rate of return available in the market on an investment free of default risk
Rolling Average: An average commonly used with time series data to smooth out short-term fluctuations and highlight longer-term trends or cycles.
Rollup: A process used by investors (commonly private equity firms) where multiple small companies in the same market and/or industry are acquired and merged. The principle aim of a rollup is to reduce costs through economies of scale.
Rule of Thumb: A mathematical formula developed from the relationship between price and certain variables based on experience, observation, hearsay or a combination of these; usually industry specific. A rule of thumb is a common procedure or practice to empirically value a business. These procedures are based on past valuation experiences and estimates in that industry, rather than using more complex calculations.
Business Development: S
Safe harbour: A ploy to foil a takeover bid in which the target company goes out and buys a heavily regulated business so that acquisition of such a company becomes unattractive to the sharks.
Sales Coach: – An expert in sales who works on a 1-2-1 basis or with small groups of sales people in order to improve their sales abilities and results.
Sales Training: – Training, often in a group setting, focusing on more generic techniques such as how to close a sale.
Sandbagging: A defensive move in a takeover bid, in which the target company plays for time being, in the hope that a white knight will come to the rescue.
Scorched earth policy: A defensive move in a takeover bid, adopted by the target company. In order to make itself unattractive as a takeover target, the company borrows money at exorbitant rates of interest. This unwise act may prevent the takeover, but often ruins the company.
Scorecard: – A scorecard is a visual display of the most important information needed to achieve one or more objectives, consolidated and arranged on a single screen so the information can be monitored at a glance. Unlike dashboards that display actual values of metrics, scorecards typically display the gap between actual and target values for a smaller number of key performance indicators.
Seller Financing: When the person selling a business offers financing to a buyer instead of or, in addition to the buyer finding third-party financing.
Seller’s Discretionary Cash (SDC): Method that addresses pricing based on what a buyer can afford to pay for the cash flow of the business.
Seller’s Discretionary Cash Flow (SDCF): See Discretionary Earnings.
Seller’s Discretionary Earnings (SDE): See Discretionary Earnings.
Sensitivity Analysis: A method of testing how sensitive certain outputs in a financial model are to changes in certain assumptions.
Share Exchange Ratio: The offer price divided by the acquirer’s share price.
Share Issuance Discount: Any discount (if any) to the current market price that will be used to determine the number of shares the target receives.
Share/Stock Deal: The acquirer purchases all the shares of the target (and assumes all assets and liabilities).
Shark repellent: Any of the many measures taken by the target company to hold off hostile takeover bids:A provision that the bidder must offer the same price of shares to all shareholders, and not to just a group of those who support the takeover;A Golden Parachute contact with top executives which will make it expensive indeed to get rid of them;A provision that a more than simple majority of shareholders, say two-thirds of three-fourths, would be required to ratify a takeover vote;Merger with another company, which will make the original takeover proposal difficult.
Shark watcher: A specialist firm which keeps a watch on takeover activities on behalf of its client. It does so by monitoring trading patterns of its client's shares and by trying to determine the identity of parties who are buying up its client's share. A shark watcher also solicits proxies from the shareholders on behalf of its clients.
Sharks: Corporate raiders.
Shell company: A registered company which has no significant assets or activities, often floated to collect finances for future operations, or set up as a front to evade taxes.
Show-stopper: Target starting litigation to thwart an attempt at a takeover.
SIC: Standard Industrial Classification.
Six Sigma: – A quality management and process improvement methodology particularly well suited to process intensive industries like manufacturing. Six Sigma measures a given process by its average performance and the standard deviation (or variation) of this performance, aiming to reduce the occurrence of defects in a given process to a level of “Six Sigma” outside the norm; no more than 3.4 times per million.
Sleeping beauty: A company which has some very attractive features, such as huge cash reserves, undervalued assets and real estate; it can be a potential target for a takeover which has not yet been propositioned by a bidder.
Small Business Administration (SBA): In the United States, a guarantor/backer of loans offered by banks or credit unions. Note: In Canada called Small Business Loan SBL also provides other services for small businesses.
Social Selling: - Utilising social networks such as LinkedIn, Twitter and Facebook as part of the sales process.
Special Interest Purchases: Acquirers who believe they can enjoy post-acquisition economies of scale, synergies or strategic advantages by combining the acquired business interest with their own. Also known as Strategic Buyers.
Spin Off: It is a kind of a demerger where an existing parent company distributes on a pro-rata basis all the shares it owns in a controlled subsidiary to its own shareholders by which it gains effect to make two of the one company or corporation. There is no money transaction, subsidiary’s assets are not valued, transaction is not treated as stock dividend and tax free exchange. Both the companies exist and carry on business. It does not alter ownership proportion in any company.
SPIN Selling: – Questioning technique based on identifying the problem, exploring the impact that the problem causes and then offering a solution. SPIN stands for Situation questions, Problem questions, Implication questions, Need-Payoff questions.
Split Off: This occurs when equity shares of a subsidiary company are distributed to some of the parent company’s shareholders in exchange for their holdings in parent company.
Split Up: It is s diversion of a company into two or more parts through transfer of stock and parent company ceases to exist.
Standard of Value: The identification of the type of value being used in a specific engagement (e.g., fair market value, fair value, investment value).
Stock Consideration: The portion of the purchase price given to the target in the form of shares of the acquirer’s stock.
Strategic Management System: – Describes the use of the Balanced Scorecard in aligning an organization’s short‐term actions with strategy. Often accomplished by cascading the Balanced Scorecard to all levels of the organization, aligning budgets and business plans to strategy, and using the Scorecard as a feedback and learning mechanism.
Strategy: – Strategy is the way an organization seeks to achieve its vision and mission. It is a forward-looking statement about an organization’s planned use of resources and deployment capabilities. Strategy becomes real when it is associated with: 1) a concrete set of goals and objectives; and 2) a method involving people, resources and processes.
Strategy Map: – A specific version of a strategy plan that adheres to the Balanced Scorecard methodology. Strategy maps depict objectives in multiple perspectives with corresponding cause and effect linkages.
Strategy Plan: – A visual representation of an organization’s strategy and the objectives that must be met to effectively reach its mission. A strategy plan can be used to communicate, motivate and align the organization to ensure successful execution.
strong bear hug: is a formal notice to the target company of an intended takeover. A
Subsidiary: Acquirer completely takes over the target but preserves the target’s brand for the sake of brand reputation or customer base.
Summer soldiers: Directors and management staff or a company threatened with a hostile takeover who only put up a token fight before giving up.
Supermajority amendment: A provision in the corporate charter to fend off hostile takeovers which requires a very large number of shareholders, between 67% and 90%, to approve major decisions of the company.
Sustaining Capital Reinvestment: The periodic capital outlay required to maintain operations at existing levels, net of the tax shield available from such outlays.
Swap ratio: This is an exchange rate of the shares of the companies that would undergo a merger. This is calculated by the valuation of various assets and liabilities of the merging companies.
Synergies: Cost savings and revenue enhancements that are expected to be achieved in connection with a merger/acquisition.
Systematic Risk: The risk that is common to all risky securities and cannot be eliminated through diversification. The measure of systemic risk in stocks is the beta coefficient.
Business Development: T
Takeover: A change in the control of a company, accompanied usually by a changed in the board of directors and senior management if the takeover is hostile. In a friendly takeover, the management doesn't usually change, and the takeover works to the benefit of the target company. In a hostile takeover there may be an attractive public offer for the shares, or unsolicited merger proposals for the management, accumulation of controlling shares through buying in the open market, or proxy fights. There are various methods of fighting off hostile takeover bids, with colourful names.
Takeover bid: It is the intention of the acquirer reflected in the action of acquiring the shares of the Target company.
Takeover Premium: The percentage above the target’s current share price (or VWAP) the offer price represents.
Tangible Assets: Physical assets (such as cash, accounts receivable, inventory, property, plant and equipment, etc.).
Target: – A target is the defining standard of success, to be achieved over a specified time period, for the key performance indicators associated with a particular strategic objective. Providing context to make results meaningful, targets represent the organization’s “stretch goals.”
Task: – Represents details activities or tasks to be carried out to achieve each initiative. It captures information like resources, time , constraints, risk, budgets, milestone, duration to complete the tasks.
Teaser: A document circulated to potential buyers of a specific business is for sale without disclosing the identity of the business. The documents, often prepared by an advisor, details information that is designed to entice potential buyers.
Teddy bear hug: is an indication from a target company that it will favorably consider a takeover, but at a higher price than offered.
Telemarketing: - Outbound telemarketing is the process of telephoning potential customers. Inbound telemarketing is where respondents call you, usually as a response to direct mail or an advertisement.
Tender offer: The acquirer pursues takeover (without consent of the acquiree) by making a tender offer directly to shareholders of the target company to sell their shares. This offer is often made for cash.
Terminal Value: The terminal value of a security is the present value at a future point in time of all future earnings growing at an assumed constant rate (growth rate). It is most often used in multi-stage discounted earning analysis, and allows for the limitation of projections to a several-year period. Also see Residual Value.
Theme: – Descriptive statement representing a major component of a strategy, as articulated at the highest level in the Vision. Most strategies can be represented in three to five themes. Themes are most often drawn from an organization’s internal processes or the customer value proposition, but may also be drawn from key financial goals. The key is that themes represent vertically linked groupings of objectives across several scorecard perspectives (at a minimum, Customer and Internal). Themes are often stated as catchy phrases that are easy for the organization to remember and internalize. For example: Operational Excellence or Customer Intimacy or Strategic Partnering.
Threshold: – A means of describing and/or depicting the performance gap in easily understandable terms. Examples of threshold methods include “letter-grade” (A/B/C/D/F) and “traffic-light” (green/yellow/red).
Timing of Synergies: How long it is estimated to take to realize the synergies in the transaction.
Toehold Position: Purchasing less than 5% of a company’s shares – to obtain a significant equity position, perhaps aiming to eventually gain a controlling interest, but a small enough purchase to avoid having to notify regulatory authorities.
Toehold purchase: To purchase just less than 5% shares of a company to get a toehold, so that one can buy more later and notify the authorities that one now holds more than 5% shares of the company.
Transaction Close Date: The date on which the transaction is expected to be officially completed.
Transaction Method: See Merger and Acquisition Method.
Transaction Value: The total of all consideration passed at any time between the Buyer and Seller for an ownership interest in a business enterprise and may include, but not be limited to, all remuneration for tangible and intangible assets such as furniture, equipment, supplies, inventory, working capital, noncompetition agreements, employment and/or consultation agreements, licenses, customer lists, franchise fees, assumed liabilities, stock options, stock or stock redemptions, real estate, leases, royalties, earn-outs and future considerations.
Business Development: U
Unlevered Beta: The beta reflecting a capital structure without debt.
Unsystemic Risk: The risk specific to an individual security that can be avoided through diversification.
USP: - The defining reasons which provide a competitive advantage over the competition. USP stands for Unique Selling Proposition.
Business Development: V
Valuation: The act or process of determining the value of a business, business ownership interest or intangible asset(s) using one or more valuation methods
Valuation Approach: A general way of determining a value indication of a business, business ownership interest, security or intangible asset using one or more valuation methods. The three common valuation approaches are the market approach, the income approach and the asset approach.
Valuation Date: The specific point in time as of which the valuator’s opinion of value applies (also referred to as “Effective Date” or “Appraisal Date”).
Valuation Method: Within the three valuation approaches, there are a number of specific methods to determine value. Each method is a specific way to determine the value of a security, business, business ownership interest or intangible assets and hence estimate its worth.
Valuation Procedure: The act, manner, and technique of performing the steps of a valuation method.
Valuation Ratio: A fraction in which a value or price serves as the numerator and financial, operating, or physical data serves as the denominator.
Value Chain: – The process steps by which a company moves from the identification of its customer needs to customer fulfilment.
Value Proposition: – Describes how an organization intends to differentiate itself in the marketplace and what particular value it will deliver to customers. Many organizations choose one of three “value disciplines” operational excellence, product leadership, or customer intimacy.
Values: – Representing an organization’s deeply-held and enduring beliefs, an organization’s values openly declare how it expects everyone to behave and are often embedded in its vision.
Vertical Integration: Merging with companies that are in a company’s supply chain; may be composed of both forward and backward integration.
Vertical merger: This would give backward integration to the company to assimilate the sources of supply and forward integration towards the market. ie, the merging undertaking would be a buyer or a supplier using its product as intermediary material for final production.
Vision: – A concise statement defining an organization’s long-term direction, the vision is a summary statement of what the organization ultimately intends to become five, 10 or even 15 years into the future. It is the organization’s long-term “dream,” what it constantly strives to achieve. A powerful vision provides everyone in the organization with a shared mental framework that helps give shape to its abstract future.
Voluntary winding up: The original company which has split into several companies after division, could be wound up voluntarily.
Voting Control: De jure control of a business enterprise. De jure means Existing in law, or having formal, legitimate, moral, or rightful effect, force, or possession.
VWAP: Volume Weighted Average Price, often used in reference to the takeover premium (e.g., 15% above the 20-Day VWAP).
Business Development: W
Warm Call: - The process of telephoning potential customers with whom you already have some level of relationship, e.g. you have connected to them on LinkedIn.
Weighted Average Cost of Capital (WACC): The cost of capital (discount rate) determined by the weighted average, at market value, of the cost of all financing sources in the business enterprise’s capital structure.
Weighted Average Discretionary Earnings (DE): Valuation method used to determine an average cash flow, taking into account that sales and profits may vary from year to year.
White knight: A term used in a hostile takeover context, when a company, which can not prevent a takeover looks for a friendly rescuer who might outbid the Black Knight and acquire the company on amicable terms.
White Knight Defense: A friendly takeover bidder that outbids the Black Knight.
White squire: Not quite a white knight, but one who buys less than a controlling interest in the company, but enough shares to prevent a hostile takeover.
White Squire Defense: An ally of the target company that does not buy enough shares to gain a controlling interest, but enough to prevent the hostile takeover acquirer from gaining a controlling interest.
Working Capital: The excess of the value of the current assets over the value of the current liabilities. This value will be negative if current liabilities exceed current assets.