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M&A 101

By Jeffrey Long

The world of Mergers and Acquisitions for non-Mergers and Acquisitions people.

Jeffrey Long

Jeffrey Long

Southern Region Mergers & Acquisitions Lead
Part One

M&A Jargon Explained

Half the battle in being an M&A advisor is understanding the jargon, abbreviations and acronyms.

Here are some of the must-knows:

OldCoOld CompanyUsually referring to the seller. when the seller only divests a part of its business and the old company continues to trade.
NewCoNew CompanyThe new company that will be formed after the acquisition
PEPrivate EquityUsually referring to a private equity firm (such as Exponent). Private equity firms act as both buyers and seller. PE usually invest for profit in established companies
VCVenture CapitalSimilar to PE but usually invest in start-ups and take equity in the company itself rather than debt finance.
VDRVirtual Data RoomOnline data room for secure file sharing from the target organisation/vendor
TSATransition Service AgreementAn agreement to govern the provision of certain services by the Old Co to the New Co post Closing.
ClosingThe date the deal closed
DDDue DiligenceThe Buyer’s exploration of the Seller’s company. Usually takes the form of Commercial, Financial, Legal, Technology but can include others like environmental, culture etc
EBITDAEarnings Before Interest, Tax, Depreciation and AmortisationUsed to calculate Target value and purchase price
Adjusted EBITDAJust EBITDA with adjustmentsUsed to calculate Target value and purchase price. Adjustments would typically take into account ‘one-offs’ such as external market shocks
SynergiesBusiness benefits as a result of two things combiningThis is the holy grail of M&A – it is the reason people do deals.
Capturing SynergiesMaking sure you achieve the synergies you planned for the deal
1+1 = 3A party should only look to acquire if the acquisition generates more value than the two entities operating independently.
TargetAn entity that a buyer has identified for purchase
SAPA (or SPA)Sale and Purchase AgreementThe legal document that frames the deal and sets out each party’s obligations
ConsiderationThe amount paidThis is what the buyer gives the seller in return for the Target. It might not always be money and can be made up of other assets.
LOILetter of IntentWhat the buyer signs and sends to the seller to show their interest in doing a deal
HOAHeads of Agreement A pre-deal framework agreement which sets out broad principals of the deal while confirming the details