M&A Vocab Flashcards
(41 cards)
when an acquiring company attempts to take over a target company against the wishes of the target company’s management. An acquiring company can achieve a _____ by going directly to the target company’s shareholders or fighting to replace its management.
hostile takeover
defense tactic utilized by a target company to prevent or discourage attempts of a hostile takeover by an acquirer
poison pill
hostile takeover defense whereby a friendly company purchases the target company instead of the unfriendly bidder
white knite
a company that makes an unwelcome, hostile takeover bid
black knight
Standard clauses in an agreement that do not change much from transaction to transaction and typically are not heavily negotiated. These are usually located in the Miscellaneous section, with common examples including Notices, Counterparts, Severability & Assignment, Arbitration, Governing Law and Waiver of Right to Trial by Jury.
Boilerplate
a term used to define all the significant points that need to be dealt with prior to closing a transaction. They are itemized in the letter of intent (LOI) by either the buyer or the seller, although it is usually the buyer who typically inserts them
conditions precedent
collateral agreements in a contract. They become relevant in contracts for the purchase and sale of a business or shares if the relevant contract is executed in two steps: Signing and closing. In the phase between the obligation to purchase (signing) and the actual transfer (closing), the ownership and management regarding the business/company remains with the seller. The buyer therefore has a legitimate interest in a correct management of the business/company.
Covenants
an online warehouse of key documents about a company, to facilitate the extensive due diligence process typically undertaken by buyers
data room
EBITDA
earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances
a fee paid to a party as compensation for a broken deal or contract failure. Two common situations where a _____ could apply is if a mergers and acquisitions (M&A) deal proposal is terminated for pre-specified reasons and if a contract is terminated before its expiration.
break fee
a request that someone else vote on behalf of a shareholder at a shareholders meeting. The solicitation contains materials about the issuing entity that investors need to make informed decisions about shareholder votes. This issuance is required for publicly-held companies
proxy solicitation
where a portion of the purchase price is put in a third-party account to serve as security for the buyer.
holdback escrow
This particular clause gives the parties, usually only the purchaser, the right to walk away from the deal in the event of a ____________occurring between the signing and the closing (the so-called “interim-period”) of the transaction
“mac” clause/material adverse change
the process of bringing two or more companies together with the aim of maximizing synergies to ensure that the deal lives up to its predicted value.
post-closing integration or post merger integration (PMI)
valuation method used to estimate the value of an investment based on its expected future cash flows. ___analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future.
Discounted cash flow
the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a _____ of $1 billion
Market cap—or market capitalization
the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.
leveraged buyout (LBO)
arbitration v litigation
Essentially, litigation means taking a dispute to court. Both sides present their case before a judge or jury, who will then render a decision. Arbitration, on the other hand, is a private process in which both parties agree that an arbitrator (a neutral third party) will render a binding decision
adjustment provisions focus on liabilities and assets of the target company that fluctuate as a result of business operations between the time the parties agree on a purchase price and the actual closing of the transaction, which could be months after the initial agreement on price.
post-closing adjustment
contractual provision stating that the seller of a business is to obtain future compensation if the business achieves certain financial goals.
earnout
the procedure of reviewing mergers and acquisitions under antitrust / competition law
merger control
A _____ is an assertion of past or existing fact given by one party to induce another party to enter into an agreement. A _____ is a promise that the assertion of existing fact or future facts are or will be true, along with an implied promise of indemnity if the assertion is false
representation, warranty
a contractual remedy and risk allocation mechanism that the parties to an M&A transaction negotiate to address certain post-closing issues and losses
Indemnification
a legal contract governing the combination of two companies into a single business entity
merger/acquisition agreement
