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M&A 101
By Jeffrey LongThe world of Mergers and Acquisitions for non-Mergers and Acquisitions people.
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:
| Acronym | Meaning | Description |
|---|---|---|
| OldCo | Old Company | Usually referring to the seller. when the seller only divests a part of its business and the old company continues to trade. |
| NewCo | New Company | The new company that will be formed after the acquisition |
| PE | Private Equity | Usually 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 |
| VC | Venture Capital | Similar to PE but usually invest in start-ups and take equity in the company itself rather than debt finance. |
| VDR | Virtual Data Room | Online data room for secure file sharing from the target organisation/vendor |
| TSA | Transition Service Agreement | An agreement to govern the provision of certain services by the Old Co to the New Co post Closing. |
| Closing | The date the deal closed | |
| DD | Due Diligence | The 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 |
| EBITDA | Earnings Before Interest, Tax, Depreciation and Amortisation | Used to calculate Target value and purchase price |
| Adjusted EBITDA | Just EBITDA with adjustments | Used to calculate Target value and purchase price. Adjustments would typically take into account ‘one-offs’ such as external market shocks |
| Synergies | Business benefits as a result of two things combining | This is the holy grail of M&A – it is the reason people do deals. |
| Capturing Synergies | Making sure you achieve the synergies you planned for the deal | |
| 1+1 = 3 | A party should only look to acquire if the acquisition generates more value than the two entities operating independently. | |
| Target | An entity that a buyer has identified for purchase | |
| SAPA (or SPA) | Sale and Purchase Agreement | The legal document that frames the deal and sets out each party’s obligations |
| Consideration | The amount paid | This 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. |
| LOI | Letter of Intent | What the buyer signs and sends to the seller to show their interest in doing a deal |
| HOA | Heads of Agreement | A pre-deal framework agreement which sets out broad principals of the deal while confirming the details |