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Adjusted Equity Value   The Intrinsic Value or Adjusted Equity Value of a company is the book value of the equity, adjusted for over- or undervalued assets and liabilities in the balance sheet. It is commonly used as a valuation method for holding companies, real estate companies and companies in liquidation.
 
Asset deal   An Asset deal is a transaction whereby certain assets (not shares) of a company are sold. It has other financial, legal and fiscal consequences than a Share deal but may in some circumstances be a better option.
 
Blind Profile   A Blind Profile or a Teaser is a document circulated to potential investors in an investment project. It briefly describes the project in an anonymous way, and is designed to create investors' appetite for the project. It may be followed by a detailed Information Memorandum.
 
Comfort Letter   A comfort letter - in the context of mergers & acquisitions - is often asked from a potential investor, in order to get enough "comfort" as regards, amongst others, the financial ability of the potential investor to enter into a transaction.
 
Confidentiality agreement   A Confidentiality Agreement (CA) or a Non-Disclosure Agreement (NDA) is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement.
 
Data room   The Data Room is the room where all information for a due diligence audit is gathered and to which a potential buyer gets access. The data room usually contains a lot of confidential information and its access and use are subject to strict agreements and rules. A data room can also be a virtual location where information is stored in electronic format.
 
DCF method   The Discounted Cash Flow (DCF) method is a common valuation method used to estimate the value of a company. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value. This valuation method is often used when the current free cash flows are not a good representation of future cash flows. The method's disadvantage however is that it uses a lot of assumptions.
 
Discounted Cash Flow method   The Discounted Cash Flow (DCF) method is a common valuation method used to estimate the value of a company. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value. This valuation method is often used when the current free cash flows are not a good representation of future cash flows. The method's disadvantage however is that it uses a lot of assumptions.
 
Due Diligence   In relation to mergers & acquisitions, due diligence is an audit performed by the buyer with the purpose of verifying the information provided by the seller and uncovering any material information that the seller hasn't provided, either intentionally or unintentionally.
 
Earn-out   An Earn-Out is a part of the selling price of a company that is only paid in the future, subject to reaching or maintaining certain objectives (such as turnover, profitability, customer retention or employee retention). A discussion that often arises is whether the beneficiary of the earn-out still has enough control over the objectives to be reached. Also the measurement of the objectives is sometimes complicated when the acquired company has been integrated in a larger structure.
 
EBIT   Earnings Before Interest and Taxes means the operational income minus the operational costs of a business. Operational costs include material costs, services and other goods, personnel costs, depreciation and amortisation and any othet costs from operations.
 
EBITDA   Earnings Before Interest, Taxes, Depreciation and Amortisation. Or EBIT plus depreciation and amortisation. EBITDA as a metric is often used in company valuations.
 
Enterpise Value   The EV (Enterprise Value) of a company is its total value, being the sum of the market value of its equity and the market value of its (financial) debt. This Enterprise value can be calculated according to different valuation methods such as the Multiples method or the Discounted Cash Flow method.
 
EQ   The EQ (Equity value) is the market value of all shares of the company, calculated as the Enterprise value minus the market value of all (financial) debts of the company. The market value of equity is in most cases different from the book value of equity, the latter being derived from the financial statements.
 
Equity value   The EQ (Equity value) is the market value of all shares of the company, calculated as the Enterprise value minus the market value of all (financial) debts of the company. The market value of equity is in most cases different from the book value of equity, the latter being derived from the financial statements.
EV   The EV (Enterprise Value) of a company is its total value, being the sum of the market value of its equity and the market value of its (financial) debt. This Enterprise value can be calculated according to different valuation methods such as the Multiples method or the Discounted Cash Flow method.
 
Growth capital   Growth capital is additional capital from existing or new investors, in order to finance the growth of a company. This growth can come from existing or new products, from entering new markets or from acquisitions.
 
Hedge Fund   A hedge fund is an investment fund with much more flexibility in its investment strategy than a tradtional investment fund. A hedge fund may invest in different asset classes (shares, bonds, currencies, raw materials, precious metals, …) while combining this with non-traditional portfolio management techniques such as using leverage (borrowing money to invest) or short-selling (borrowing overvalued securities and sell them in order to buy them back later at a lower price).
 
Information Memorandum   An Information Memorandum (IM) is a sales document prepared to inform potential buyers of a company. It comprises amongst others a detailed description of the business, the market, the competition, the business model, the management and employees, the technology and the financial performance of the company.
 
Intrinsic value   The Intrinsic Value or the Adjusted Equity Value of a company is the book value of the equity, adjusted for over- or undervalued assets and liabilities in the balance sheet. It is commonly used as a valuation method for holding companies, real estate companies and companies in liquidation.
 
LBO   A Leveraged Buy-Out (LBO) is an acquisition of a company, to a large extent financed with debt (=leverage). The funds for the repayment of the debt have to come from the cash generated by the acquired target company. A leveraged buy-out allows investors to buy a company with a limited deployment of equity.
 
Letter of intent   A Letter of Intent (LOI) is a written agreement between parties, whereby both parties confirm their intention to come to a transaction. This intention may be binding or non-binding, or may be subject to conditions.
 
Leveraged buy out   A Leveraged Buy-Out (LBO) is an acquisition of a company, to a large extent financed with debt (=leverage). The funds for the repayment of the debt have to come from the cash generated by the acquired target company. A leveraged buy-out allows investors to buy a company with a limited deployment of equity.
 
LOI   A Letter of Intent (LOI) is a written agreement between parties, whereby both parties confirm their intention to come to a transaction. This intention may be binding or non-binding, or may be subject to conditions.
 
M&A   M&A means Mergers & Acquisitions. A Merger is a transaction whereby two more or less equal companies merge into one company. An acquisition is a transaction whereby one company buys another one. An acquisition can be friendly (with the consent of the target) or hostile (without consent of the target).
 
Management buy in   A Management Buy-In (MBI) is a transaction whereby management teams want to buy an existing business where they are not currently employed, but where they rather aim to replace all or part of the existing management team. Typically this occurs in situations where the business is underperforming due to weak management or lack of suitable expertise or where the business growth demands a more knowledgeable and experienced management team.
 
Management buy out   A Management Buy-Out (MBO) is a transaction whereby the management wants to buy the business where they are currently employed. Management Buy-Outs are often structured as leveraged buy-outs, whereby the management is also financially supported by an investor and where investors grant significant incentive schemes to the management, upon reaching certain targets and objectives.
 
MBI   A Management Buy-In (MBI) is a transaction whereby management teams want to buy an existing business where they are not currently employed, but where they rather aim to replace all or part of the existing management team. Typically this occurs in situations where the business is underperforming due to weak management or lack of suitable expertise or where the business growth demands a more knowledgeable and experienced management team.
 
MBO   A Management Buy-Out (MBO) is a transaction whereby the management wants to buy the business where they are currently employed. Management Buy-Outs are often structured as leveraged buy-outs, whereby the management is also financially supported by an investor and where investors grant significant incentive schemes to the management, upon reaching certain targets and objectives.
 
Memorandum of Understanding   A Memorandum of Understanding (MOU) is an agreement between parties which describes how both parties understand a transaction and how they would be willing to do a transaction, without having a binding character to enter into such transaction.
 
MOU   A Memorandum of Understanding (MOU) is an agreement between parties which describes how both parties understand a transaction and how they would be willing to do a transaction, without having a binding character to enter into such transaction.
 
Multiples Method   The Multiples Method is a valuation method which assumes that the value of a company is derived from its profitability, regardless of the assets it owns. The value is derived by using a multiplicating factor (multiple) of a financial metric such as revenues, EBITDA, EBIT or Net Profit, this multiple coming from comparable companies that are publicly quoted or from recent investment transactions in comparable companies. As it is relatively simple valuation tool, it is often used, however often also misused or misinterpreted.
 
NDA   A Confidentiality Agreement (CA) or a Non-Disclosure Agreement (NDA) is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement.
 
Non Disclosure Agreement   A Confidentiality Agreement (CA) or a Non-Disclosure Agreement (NDA) is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement.
 
Private equity   Private equity is a broader term to indicate all investments in equity of companies that are not quoted on a public stock exchange, and is as such opposed to 'public equity'. The risk of such investment is in general perceived higher, because of the illiquidity of the investment. Investors can however have more controlling stakes in the company, and can have as such more control on the company, its strategy and management.
 
Share deal   A Share Deal is a transaction whereby the shares of a company are bought or sold, and is opposed to an Asset Deal.
Share Purchase Agreement   A Share Purchase Agreement (SPA) is an agreement between the seller and the buyer of the shares of a company. It contains amongst others the subject and the terms and conditions (price and payment method) of the transaction, but also a number of other clauses such as representations and warranties.
 
SPA   A Share Purchase Agreement (SPA) is an agreement between the seller and the buyer of the shares of a company. It contains amongst others the subject and the terms and conditions (price and payment method) of the transaction, but also a number of other clauses such as representations and warranties.
 
Vendor loan   A Vendor Loan is a loan given by the seller (the "vendor") of a company, and which is in fact a deferred payment of the purchase price. The repayment can also be subject to certains terms and conditions.
 
WACC   The Weighted Average Cost of Capital (WACC) of a company is the total cost of its financing structure, meaning the remuneration it has to pay to its (financial) debt holders and to its shareholders. The Weighted Average Cost of Capital is also used to discount the future cash flows in the Discounted Cash Flow method.
 
Weighted Average Cost of Capital   The Weighted Average Cost of Capital (WACC) of a company is the total cost of its financing structure, meaning the remuneration it has to pay to its (financial) debt holders and to its shareholders. The Weighted Average Cost of Capital is also used to discount the future cash flows in the Discounted Cash Flow method.