Core M&A deal structures, valuation approaches, and due diligence vocabulary.
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- What is an asset purchase?
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A transaction in which the buyer acquires specific assets and liabilities of a target company, but not the company entity itself.- What is a stock purchase?
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A transaction in which the buyer acquires all outstanding shares of the target company, gaining ownership of the entire entity.- What is a merger?
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A transaction in which two companies combine to form a new entity, with one company typically ceasing to exist as a legal entity.- What is a tender offer?
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A public offer to buy shares of a target company directly from shareholders at a specified price and within a set timeframe.- What is a leveraged buyout (LBO)?
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A transaction where a target company is acquired using significant debt financing, with the target's assets often used as collateral.- What is an earnout?
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An arrangement in which the seller receives additional payment contingent on the target achieving specified financial or operational milestones after closing.- What is a reverse merger?
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A transaction in which a private company merges with a public company, allowing the private company to become publicly traded without a traditional IPO.- What is a consolidation?
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A transaction in which two or more companies merge to form an entirely new entity, with all original companies ceasing to exist.- What is a strategic buyer?
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A company that acquires a target business to gain synergies such as cost savings, revenue growth, or expanded market reach.- What is a financial buyer?
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An investor such as a private equity firm that purchases a target company primarily for financial returns rather than operational synergies.- What does DCF stand for?
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Discounted Cash Flow, a valuation method that projects future cash flows and discounts them to present value using a discount rate.- What is comparable company analysis?
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A valuation method that compares the target company to similar publicly traded companies and applies their trading multiples to the target's financials.- What is precedent transactions analysis?
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A valuation method that examines prices paid in similar historical M&A deals and applies those transaction multiples to value the target.- What does EV/EBITDA multiple measure?
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Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation, and Amortization; shows what the market pays per dollar of operating earnings.- What does P/E multiple measure?
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Price-to-Earnings ratio; shows how much investors pay for each dollar of the company's net earnings.
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