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M&A jargon

demystified

kpmg.com/be/mandajargon

The AMandAdictionary

LOI?

CoCo?MBI?

Alpha? Grace?





M&A jargon demystified

Glossary of more than 150 commonly

used terms in company mergers and

acquisitions



Dépôt légal: D/2014/2664/551

ISBN: 978-90-46-57214-6

BP/KPMGMAL-BI14001

Editeur responsable: Hans Suijkerbuijk,

Waterloo Office Park, Drève Richelle, 161 L,

B-1410 Waterloo

© 2014 Wolters Kluwer Belgium NV

Disclaimer

Nothing in this publication, even in part, may be published, reproduced, translated or

adapted in any form whatsoever, including photocopying, microfilming, recording or

disk, or included in a computerized data bank without the previous express permission

of the editor.

The information provided in this document is general in nature and does not cover a

particular person or entity. While we strive to provide you accurate and punctual infor-

mation, it is impossible to guarantee the accuracy at the time of receipt or in the future.

It is also not recommended for you to follow this information without the advice of a

professional who specializes in this area and has taken care of thoroughly analyze your

particular case.

We would like to draw your attention to the fact that the views and opinions expressed

herein are those of the author and do not reflect those of the KPMG network in Bel-

gium. The information provided in this document is general in nature and does not refer

to the specific situation of a person or entity.

The author or publisher cannot be held responsible for any damage suffered by the

reader as a result of imperfections in this book.



1M&A jargon demystified

Among professionals who are active in the world of M&A (Mergers & Acquisitions,

a term that is used for a transaction in which a company is acquired or is merged

with another company), the use of jargon is well established, so well in fact that at

times no one else can understand what they are saying.

This book aims to create clarity in the tangle of technical terms. It is aimed at

everyone who is interested in mergers and acquisitions or who would like to

master M&A jargon. It puts simplicity first, so do not expect any «scientific» or

legal explanations of the terms, but rather a didactic interpretation, based on ourown experience and that of our colleagues from the KPMG network who work

in M&A. After reading this book, you will perhaps possess a more thorough

knowledge of mergers and acquisitions, but we do not recommend using these

practical explanations in negotiations and contracts, or otherwise allowing them to

have any effect on the transaction. This is to avoid misunderstandings.

The book is structured by grouping content-related terms into chapters and, where

possible, has also been presented in a logical sequence. Where we use new

technical terms in an explanation, we explain them in a subsequent section. Youtherefore do not need to browse through the entire book to gain an understanding.

If you wish to look up a term quickly, please refer to the alphabetical index at the

back of the book.

In this second, fully revised edition of this book, we have added a number of new

terms, most of which are related to capital markets («the stock exchange») and

updated a number of terms.

This book was made possible through the efforts of many people. In particular:

Yann Dekeyser, Stijn Potargent,Wouter Caers, Jorn De Neve, Koen Fierens, Luc

Heynderickx, Peter Lauwers, Wouter Lauwers and Rosy Rymen.

Foreword



2 M&A jargon demystified

Finally, I would like to thank the marketing department of the KPMG network in

Belgium and publisher Wolters Kluwer for their suggestions on writing style and

language usage and their support with the layout.

Additional comments and suggestions are always welcome, and can be sent to

[email protected].

KPMG M&A services are provided by

independent member firms affiliated with the

KPMG network. In Belgium these are KPMG

Advisory burg. cvba and KPMG Tax & LegalAdvisers burg. cvba.

Each day, more than 5,000 professionals within the

KPMG network, in 48 countries around the world,

provide advice on mergers, acquisitions, divestments,

joint ventures and strategic alliances. They assist

clients throughout the entire transaction, from the

strategic evaluation to the completion of the transaction

and the final integration or divestment.

About KPMG M&A Services

KPMG Advisory




Table of contents

Forward 1

1. Agreements 5

1.1 Agreements in General 6

1.2 Guarantee provisions in the agreemen 8

2. Deal structuring 13

3. Price 19

4. Transaction process viewed from the perspective of the buyer 27

5. Transaction process viewed from the perspective of the seller 33

6. Advisors 37

7. Valuation 41

8. Buy-out 47

8.1 Perspective of the fund 48

8.2 Debt financing 52

9. Growth capital 57

10. Operational elements of the deal 61

11. Capital markets 65

Index 71





1Agreements




1.1 AGREEMENTS IN GENERAL

An agreement on the sale of a company involves exchanging a large

number of documents. We have listed the most commonly used below, in

an order that attempts to reflect chronology to some degree.

> NDA / Non Disclosure Agreement: an undertaking to ensure secrecy. In

this agreement, the parties confirm that they will not misuse the information

exchanged in the context of merger talks. An NDA also often includes other

provisions, such as an agreement not to poach staff during the negotiations.

> Offer Letter: a letter indicating the intention to purchase, which is often of a non-

binding character ( see also «Non-binding/binding»).

> Exclusivity: a clause in a letter or an agreement in which the seller states that

it is not negotiating with any other parties and will not begin or enter into any

such negotiations. Exclusivity is for a limited

time period.

> LOI / Letter Of Intent: a declaration of intent.

This term is used for the first written document

setting out the intentions of the parties.

Generally, it is nothing more than an intention

to continue negotiating subject to only two

binding clauses (i.e. exclusivity and secrecy).

> MOU / Memorandum Of Understanding: a statement in principle ( see

also «LOI»). In practice, these terms are often used interchangeably.

An LOI often contains

both binding and

non-binding clauses.

In addition to clauses concerning secrecy,

an NDA often also contains other clauses.




> (Non) Binding: the binding character of clauses or the entire agreement is a

matter that requires particular attention when preparing documentation to be

exchanged by the parties. Non-binding statements are often chosen at an earlystage and changed into more binding statements/documents as the sale process

progresses.

> MAC / Material Adverse Change: the lack of any fundamental change of

circumstances (MAC) affecting the company is a very common condition for

converting an LOI into a binding SPA. In practice, the proper definition of the

MAC is often part of the discussions. Often, reference is made to maintaining

profitability, not losing important customers, maintaining licenses, and similar

matters.

> SPA / Share Purchase Agreement: an SPA is the final agreement between

the buyer and the seller on the sale of the company, subject to a number of CPs

(condition precedents).

> Heads of Agreement: an agreement in principle ( see also «LOI» and

«MOU»). In practice, these terms are often used interchangeably. This term also

refers to a binding list of basic elements that will be covered in more detail in a

Share Purchase Agreement («SPA»).

> CP / Condition Precedent: a CP is a condition for concluding the agreement.

Legally speaking, this can have the character of both a condition subsequent and

a condition precedent. A typical example of a CP is obtaining approval for the

acquisition from the competition authorities.

> Anti-Trust Filing: the notification of the acquisition to the competition

authorities.

> Closing agreement: the document setting out

the final settlement of the agreement after the

CPs have been met. This document results in the

transfer of ownership and the payment taking

place.

Approval from

competition

authorities is a

common CP




1.2 GUARANTEE PROVISIONS IN THE AGREEMENT

The guarantee provisions in the agreement are an important part of the

negotiations. As the buyer receives only very limited statutory guarantees

when buying shares, the agreement will often provide explicit extensive

guarantees. A number of very commonly used terms are presented below.

> Representations: statements. In the event that statements made by the seller

about the company prove to be incorrect, these statements, either together with

the warranties or otherwise, form the basis for subsequent indemnities.

> Warranties: guarantees or general safeguards. The seller not only provides

statements, but also guarantees that these statements are correct. The

warranties may be time-limited and limited up to a certain amount of money.

> Indemnities: compensation for damages.

These are stipulated on top of the general

safeguards ( see warranties) for a number

of additional elements. Indemnities are used

if it is known that a particular problem existsor could occur, for example if the cost of

decontaminating the plot of land located at x

is borne by y.

> Guarantees: in order to assure the

buyer that the seller will fulfill its obligations, the seller may provide certain

financial guarantees. This is the case if a claim is submitted on the basis of the

representations and warranties or the indemnities. These guarantee stipulations

are also valid for a specific period of time and may be limited to a specific amount

of money. The most commonly used types of guarantee are the bank guarantee

(upon first request or otherwise) and escrow.

General warranties and

specific indemnities

supplement each other




> Escrow: an amount deposited in a frozen bank account to guarantee that any

losses will be compensated.

> Bank guarantee: a guarantee issued by a bank

to ensure that any losses will be compensated.

If the seller does not pay the claim, it will be paid

by the bank, instead of the seller, once certain

conditions have been met, after which the bank

demands repayment of the claim. Banks charge

a fee for issuing this guarantee.

> Disclosures: notifications. This is a list of elements that the seller disclosesto the buyer with the aim of avoiding subsequent disagreement as to whether

certain information has or has not been divulged during the negotiations. It is

important in this context to properly record whether these disclosures have an

effect on the warranties or indemnities. If, for example, the seller discloses that

soil has been polluted, this might prevent the buyer from making a claim for the

pollution.

>Threshold: frequently, parties agree only to submit claims if the total amount

of the claims exceeds a specific minimum amount. Two systems can then be

linked to this, specifically the basket and the threshold sum. Of course, hybrid

systems may also be agreed on.

> Basket: basket. Once the threshold has been reached, the loss will be

compensated in full.

An escrow may be

replaced by a bank

guarantee

Classical point of contention during negotiations: does the entire

data room ( see page 28) constitute a disclosure?




> Franchise: once the threshold has been reached, the amount of the loss in

excess of the threshold will be compensated. This means that the threshold is

similar to the franchise In an insurance policy.

> De minimis: a minimum amount for individual claims is often specified as

a claim or a combination of claims. It only counts towards the threshold if it is

equal to or greater than a specific amount.







1. OvereenkomstenOvereenkomsten

2Deal structuring

T a x

F i n

a n c e

Legal




In the case of the acquisition of a group of businesses and companies, it is

important to properly assess the order in which companies or assets are

acquired by existing companies or newly created companies. This analysis,

which is called deal structuring, seeks to combine tax optimization with a

healthy financial structure and legal simplicity and clarity.

> Asset deal: an agreement in which the assets, not the shares of a company

are sold. This has three special consequences. First, most of the debts, including

the majority of hidden debts, remain

behind in the selling company.

Second, this agreement undergoes

a different tax treatment ( seealso tax treatment). Third, there

are consequences for the legal

continuity of the activities of the

company.

> Share deal: an agreement under

which the shares of the company are sold ( see also asset deal).

>Tax treatment: usually, gains on shares are not taxable and the sale of shares(a share deal) may be preferred by the seller. On the other hand, the buyer may

prefer an asset deal for tax purposes because the goodwill paid ( see chapter

on Valuation - Goodwill) may be tax-deductible, which, in principle, is not the case

with a share deal.

> Legal continuity: this term refers to the question whether the company’s

existing contracts with customers, suppliers, staff, and authorities (including

licenses), etc., are to be retained after the acquisition. In a share deal, the shares

of the company are sold, which only rarely has an effect on the agreements

There are major differences

between an asset deal and a

share deal when it comes to

taxation.

An asset deal can include restrictions, such

as not being able to transfer licenses




that the company has entered into ( see also Change of Control Clauses).

In an asset deal, there is basically no legal continuity and all of the company’s

agreements with customers, suppliers, etc., must be entered into again, orat least be formally continued by the acquiring entity. With regard to legal

continuity, we will look at two matters: the branch, and TUPE.

> Branch of business: line of business. Under certain conditions of company

law (acquisition of a line of business), an asset deal can be made with legal

continuity.

>TUPE / Transfer of Undertakings (Protection of Employment): according to

European and Belgian social law, in many cases there is a mandatory transfer

of employment contracts, even if there is no legal continuity for the company

itself. Reference to this situation is made in a European context in TUPE, and in

Belgium in CAO 32bis (section 32b of a collective bargaining agreement).

> Change of Control Clauses: clauses in agreements concluded by the

company (e.g. for a loan from a bank), that stipulate that the contract will no

longer be valid or will be dissolved if there is a change in control of the company.

Identification of the Change of Control Clauses is an important part of the

analysis of the legal continuity of the acquisition.

> Debt pushdown: an exercise in which the acquisition debt is pushed ‘«own»

to the operating companies. Banks and other lenders prefer to provide funding to

companies that generate the operating cash flow, particularly if the acquisition of

shares is done through a holding company that has no operating activities itself.

This is often the case in private equity deals.

European TUPE regulations protect staff in an

acquisition under an asset deal.




> Leakage: when setting up an acquisition financing structure involving several

national and/or international companies, it is important to ensure that the intra-

group distribution of the profits, or the repayment of loans, results in a minimumof taxes (thus value) «leaking» by means of unrecoverable withholding taxes

(taxation at source) or dividend taxes, for example.

> Financial assistance: this term refers to Section 629 of the Belgian Company

Code, which states: “A public limited company cannot advance any funds, nor

permit loans or provide security with a view to the acquiring of its shares or

profit-sharing certificates by third parties….” This ban was lifted as of 1 January

2009, and «financial aid» or «financial assistance» is now possible under certain

conditions.








Price 310 million




In view of the fact that a company is not only a complex body of activities,

but also of assets and debts, various types of arrangements are agreed on

to fix the price. This chapter contains a number of common terms that are

used in discussions about pricing.

A classic price formulation in a contract consists of a price for the activities of

the company assuming normal working capital, minus the debts of the company,

plus the cash present in the company.

The analytical methods used during the due

diligence ( see chapter 4) examine in detail

each parameter that can have an effect on

the valuation at the time of the contractual

conclusion of the operation (the closing date).

The movements in working capital before

the acquisition will receive the buyer’s full

attention. This is because the buyer wants

to ascertain whether the receivables, the

inventory and suppliers will be in line with

those of a normal business operation at

the time of the acquisition. The buyer will

therefore want assurance that the receivables

will not be abnormally quickly converted

into cash due to pressure being placed on

customers. In addition, the buyer will want to

A locked box is not recommended in situations

where there is limited opportunity for due diligence

and in complex carve-out situations

Schematically, we can

present this as follows:

Debt free/cash free price

Minus debt

Plus cash

Minus/plus difference

between existing working

capital and normalized

working capital




deter the seller from liquidating the inventory of the company to generate cash,

thus leaving behind a company that cannot meet customer demand. Finally, the

buyer will want to deter the seller from building up delays in the payment ofsuppliers in order to accumulate cash on the closing date.

.

> Debt & cash free: the price assuming a situation without financial debts and

without cash free.

> Working capital: the sum of the customers, suppliers, inventories and other

current assets and liabilities necessary for the day-to-day operation of the

company.

> Normalized working capital: an analysis of how the working capital would

look in normal circumstances. This involves adjusting for all exceptional and

non-recurring items, such as the collapse of a major customer, a major supplier

position due to the purchase of a machine, or a large inventory position due to a

machine breakdown.

A simple example

We will take as our example a taxi company with five taxis. On the

basis of a debt-free situation and half-full fuel tanks, you determine

how much you want to pay for the taxis and the customer base. At

the time of acquisition (the date of the closing accounts) you take aninventory. You notice that there are some car loans that need to be

repaid, the fuel tanks are empty and there are still envelopes in the

taxis containing cash for buying fuel. The final price will ultimately

amount to the price payable for the business activity, minus the loan

and the fuel shortage in the tanks, plus the cash found in the taxis.




>Target working capital: the state of the working capital to be used as a basis

for settlement at the time of the closing. The target working capital is recorded

in a contract during the negotiations and is often based on a historical analysisof the working capital requirements of the business. The settlement is based on

the closing accounts, with the price being increased or reduced if the company

has more or less working capital than the target capital on the date of the

closing accounts.

> Closing accounts: when the agreement is recorded in an SPA, a future date

on which a balance sheet is to be drawn up (the closing accounts) is agreed.

These closing accounts will then form the basis for determining the net debt and

the working capital that will be used for determining the final price according tothe agreed price formula.

> Net debt: there is no official definition of net debt, which means it is important

to define it properly in the LOI and SPA. The net debt generally comprises

financial liabilities (in a broad sense) minus cash. Financial liabilities include the

following: loans and associated liabilities (including interest that is current but

not yet payable), bills of exchange, repayable subsidies, pensions and other long-

term commitments to staff, commissions giving rise to cash outflows within

the foreseeable future, off-balance sheet commitments that can be considered

equivalent to debt, and certain leasing debts.

> Belgian GAAP / Belgian Generally Accepted Accounting Principles: the

generally accepted accounting principles in Belgium. This term refers to Belgian

accounting law and accounting principles applicable in Belgium. If the SPA

includes a pricing mechanism based on the closing accounts, it is important to

specify under which GAAP these closing accounts must be drawn up. This could

be under Belgian GAAP, or under Dutch GAAP, US GAAP, Swedish GAAP, etc., or

alternatively under IFRS.

> IFRS / International Financial Reporting Standards: this is an international

GAAP used for reporting purposes by listed companies in Belgium and the EU.

> Earn-out: if there is a major price discussion between the buyer and seller

due to differing views on the future results of the company, an earn-out may




provide a solution. It makes the final price partly

dependent on the future achievement of certain

objectives. However, it is essential to be vigilant.In addition to subsequent discussions on the

measurement of the results on which the earn-out

is based, an earn-out can also obstruct the efficient

integration of the company. This is because the earn-out clause requires

that the results ‘after the acquisition’ are compared with the performance

objectives recorded ‘before the acquisition’. The full integration of the company

with the acquirer, and thus achieving synergies, can make the interpretation of

any differences more complex.

> Spread payment / vendor note / vendor loan: if the seller allows spread

payments, it implicitly grants a loan (vendor note or vendor loan) to the buyer.

> Locked box: a locked box mechanism is a price mechanism in which the price

of the shares is determined on the basis of a historical accounting situation,

rather than a future situation (closing accounts). The price is determined as a

debt and cash free price, minus historical debt, plus cash, and adjusted for the

working capital surplus or shortfall at that same historical time. In addition, it is

contractually agreed that there cannot be any cash flowing out of the company

(the locked box) in the form of the payment of dividends or management fees.

All other cash movements remain within the company and are thus assumed to

have no effect on value. This method can only be applied if the buyer can obtain

a very good picture of the balance sheet of the company during the acquisition

process.

Example

In the example of the taxi company (see page 20) the fuel payments

made using the cash in the envelopes will reduce the cash but will

also increase the contents of the fuel tanks, and thus have a neutral

effect on the value of the company.

An earn-out can

make integrationdifficult.




Ownership and controlPeriod covered by the

historical financial statements

“Classic” mechanism Closing accounts to crystallizethe situation near the time ofclosing and to adjust the price

In a locked box system, the period between the last available balance sheet and theclosing date is not covered by closing accounts but a contractual agreement that nocapital can flow out of the company.

The locked box mechanism

Period covered by the

historical financial statements

Period covered by the

closing accountsOwnership and control

Dec 2013 Jan 2014 Feb Mar Apr May Jun Jul

Dec 2013 Jan 2014 Feb Mar Apr May Jun Jul

No closingaccounts








4

Transactionprocess viewed

from the

perspective of

the buyer




Viewed from the perspective of the buyer, the sales process involves,

among other things, the buyer wanting to form a good picture of the

company it is buying, in the area of both risks and opportunities. This

investigation, which is often called auditing the books, or due diligence,

includes many elements that each form a separate element of the due

diligence process. We summarize the most common elements below.

> Financial due diligence: the review of the historical and future figures of

the company. The focus in this context is often on the quality of earnings (how

robust are the historical results?), the quality of net debt (which items could all

be taken into consideration in determining the net financial debt? – see also

debt and cash free–, the forecast (analysis of the budgets and future projections)and the normalized working capital.

>Tax due diligence: the investigation of the historical and future tax situation

and exposure of the company or companies in the areas of both direct and

indirect taxes.

> Legal due diligence: the review of the legal situation of the company in the

areas of company law, review of contracts, labor laws, intellectual property (IP),

permits, etc.

> Commercial due diligence: the review of the markets in which the company

operates and the commercial position in which the company finds itself.

> Pensions due diligence: the review of the existing and future obligations

related to pensions. The future commitments can vary based on the type of

pension plan set up by the company.

> Defined contribution plan: a pension plan

in which the final amount is not fixed, but will

be the sum of the contributions and the return

achieved. In this context, the company does

not give the employee a guarantee of what the

How far do you go

in your due

diligence?




final amount will be. However, for the members, the law protects the return on

accrued reserves by imposing a minimum return.

> Defined benefit pension plan: a pension plan in which the final amount to be

obtained is contractually fixed. In an acquisition with this type of pension plan

there is often discussion about the size of the existing pension debt. Specialized

pension actuaries are therefore consulted to analyze these types of plans and towork out how the pension provision and the accrued specific investments relate

to the pension debt.

> Insurance due diligence: the investigation into the existing insurance

coverage and variance analysis with the required coverage, as well as the

investigation into the continuity of insurance coverage during the transaction

process.

> Operations and synergy due diligence: the investigation into the efficiency

of the operations and how specific synergies can be achieved.

> Environmental due diligence: the investigation into the environmental

situation in relation to soil pollution, water pollution, air pollution and noise

pollution.

> Health and safety: the

investigation into workingconditions with a focus on health

and safety.

> Release/reliance (for

financiers): due diligence reports

prepared by advisors are used by

the acquiror and also by parties

Is the past a good mirror for

the future?

The existence of defined benefit

pension plans often makes

a transaction more complex,

depending on the type of pension

plan (defined contribution or

defined benefit).




involved in financing the acquisition. It is usual, for example, for financing banks

to have access to the reports following the exchange of a letter in which the

responsibilities are defined. Broadly speaking, there are two types of access:simple release, in which the advisors do not have any specific accountability

to the banks, and reliance, in which the advisors have a similar duty of care

(accountability) to the banks as they do to the buyer.

> Hold harmless letter / approved reader letter: letter of indemnity. A letter in

which an adviser provides a party with access to a report or a file, in which this

party agrees to indemnify the advisor from any liability that could arise from the

access provided to files or reports.

> Clean team: a clean team exists when an advisor is asked by both the selling

and the buying parties to review a very specific topic that contains sensitive

information, such as the customer portfolio. The clean team receives all the

information, but only provides a summarized analysis to its clients (the buyer and

the seller together). The parties could agree that, for example, the sale will not

proceed if one of the top five customers disappears. If the seller would rather

not disclose the identity of the customer, a ‘clean team’ scenario could offer a

way out, since the clean team can analyze the customers and report on them on

an anonymous basis.

> Data room: the room or space (may also be an electronic space, see also

E-data room) in which specific data concerning the company are collected. By

providing the buyer (and its advisors) with access to this space, the buyer will

have the opportunity to read these documents and to form a picture of the

company. Visits to a data room are governed by data room rules.

> Data room rules: a set of rules that the visitor must first accept, laying down

whether the visitor is to be given access to the data room, at what time, for how

long, and what may happen to the information contained in it (e.g. whether or

not copies can be made).

> E-data room: electronic data room. Web-based applications make it

possible to organize data rooms in a way that allows them to be consulted

online (in a protected form) once all the documents have been scanned.




E-data rooms have the advantage of being easy to use and of being accessible

24 hours a day by an international team of specialists without any need for

travel.





5

Transaction process

viewed from the

perspective of

the seller




If we look at the sales process from the perspective of the seller, we find a

sequence of process steps involving a long list of candidates from which a

short list is selected. These are sent a teaser and (after signing an NDA) also

an information memorandum and a process letter. On the basis of the offer

letters received, the decision is made as to who is to be given access to the

data room and, potentially, to the VDD (Vendor Due Diligence) report. The

terms below are therefore shown in chronological order insofar as possible.

> Long list: the initial long list of potential buyers for the company.

> Short list: the short list of companies that will be contacted in an initial phase

to gauge their interest. The short list is often created after making a selectionfrom the long list.

>Teaser / blind profile: the anonymous profile of the company that is sent to

potential buyers. The aim is to determine whether such a purchase could interest

them without the identity of the company being disclosed.

> Info Memo / Information Memorandum: information memorandum. After

signing an NDA, the potential buyer may be sent an information memorandum

and a process letter. The information memorandum is a document that describesthe company and, in addition to a good summary, includes the following

information: history of the company, description of products and services,

market position, management, financial information, etc.

> Process letter: the process letter contains information on how the seller

wants to organize the sales process, by which date a bid is expected and what

requirements it must meet and how the next phase will look after that bid.

Making a teaser is often a difficult balancing act between

preserving anonymity and providing sufficient information




> VDD / Vendor (initiated) Due Diligence: a due diligence investigation

conducted by an independent party, often an audit firm or law firm, with which

the initial client is the seller. After the closing of the transaction, the provider ofthe due diligence is accountable to the buyer.

The seller is the initial client of a vendor due

diligence, the buyer will be the final client






6Advisors




In a transaction, various advisors provide guidance to their clients and

provide a number of services. We can identify the following classic roles

and fees.

> Deal advisor: the advisor (often an investment bank or corporate finance

house), actingas a broker, which means that it looks for the parties and brings

them together, conducts and organizes negotiations and draws up the various

non-judicial sales documents (see also teaser, info memo and process letter).

> Due diligence provider: specialized suppliers of due diligence assistance,

often specialized departments of law firms or audit firms ( see also due

diligence).

> Lawyer / M&A lawyer: the specialized lawyers or corporate lawyers who

write the contracts and negotiate ( see also Chapter 1: Agreements).

> Specialist advisors: subject specialists are called upon during transactions to

provide specific advice on the environment, pensions, taxes, etc.

> Auditor: an auditor is often asked to issue a report on the closing accounts

( see page 21).

> List of parties: a list of parties is drawn up in order to obtain a clear overview

of the advisors and members of the management of the buying and selling

parties. The list records the contact details of the various people involved in the

transaction.

An M&A team usually consists of a combination

of people from within the company and external

advisors




> Fees: the fee of the deal advisor generally consists of two parts, specifically

the retainer and the success fee. The fees of other advisors are usually time and

expense based.

> Success fee: the portion of the fee that depends on the closing of the

transaction.

> Retainer fee: the fixed or monthly payment that is awarded regardless of

whether the transaction is completed.

>Time and expense based fee: fee based on hours worked and reimbursement

of expenses incurred.

Is the fee structure of the advisor in line with

the interests of the client?






7Valuation






does not, EBITDAR is a concept that is used so that the results can be analyzed

and compared independently of how the assets are financed.

> Free Cash Flow: deducting the tax on the operating profit, investments and

growth in working capital from the EBITDA provides an indication of the free

cash flow.

> PBT / Profit Before Tax: the profit before taxes, sometimes also described as

EBT/earnings before tax.

> PAT / Profit After Tax: the profit after taxes.

> EBIT / Earnings Before Interest and Tax: the profit before interest and taxes.

This is also called operating profit or operating profit before tax.

> NOPAT / Normalized Operating Profit After Tax: the normalized operating

profit after taxes. This is the operating profit after taxes, which is normalized by

eliminating all extraordinary and non-recurring items.

> DCF(F) / Discounted Cash Flow (to the Firm): a commonly used valuation

method based on an actualization of future free cash flows. The future free cash

flows are estimated on the basis of a forecast and then actualized to the current

date by using an actualization rate or discount factor known as the WACC.

> WACC / Weighted Average Cost of Capital: the weighted average cost of

capital. The WACC is calculated by taking the weighted average of the cost

of the capital and the cost of the debt (cost of equity and cost of debt). The

weighting factor is the ratio of financing from the company’s own funds (capital)

to financing from borrowed funds (loans - debt).

> Cost of debt: the cost of financing debt after deduction of the tax benefit

owing to the tax deductibility of interest amounts.

> CoE / Cost of Equity: the cost of capital, determined by equating it to the

required return that average investors want to achieve on their investments, on

the basis of the company’s risk profile. A classic way to determine the CoE is by

applying the CAPM.




> CAPM / Capital Asset Pricing Model: the model for approximating the CoE,

which is based on the assumption that an investor will require a return that is at

least equal to the return on a risk-free investment, plus an adjusted premium to

compensate for the risk that investments are made in equity and a premium for

other specific risks associated with the investment. The formula is as follows:

CoE = RF + Beta x MRP + Alpha

> RF / Risk Free Rate: the return on a risk-free investment. A long-term

investment in government bonds is often used as a reference for this.

> MRP / Market Risk Premium: market risk premium. A premium that an

investor requires on top of the risk-free rate as compensation for the fact the

investment is in shares. It is generally assumed that this premium amounts to

approximately 5%.

> Beta (levered/unlevered): the beta is the adjustment factor that we apply to

the MRP. The beta adjusts the MRP for two risk factors. The first is for the sector

in which the company operates, because, for example, a biotech company is not

comparable to a real estate company in terms of risk profile. The second is for

the debt level of the company, because it is assumed that a company with more

debts runs more risks than a company with less debts. The beta that contains

the adjustment factor for the debt level is called the levered beta, whereas the

beta not containing this adjustment factor is the unlevered beta.

> Alpha: the risk premium that is added to the CoE because of specific risks

associated with the company. The most common example of this is the small

firm premium. This is a risk premium that is added because a small company is

subject to more risks than a large company.

> Multiple: the multiple method or market method is a valuation method that

is often used to support the results of a DCF(F) method. In this method, the

company is compared with other companies whose value is known. This is

done using a multiple. Sector peers, for example, are valued at 6 times EBITDA.

CoE = RF + Beta x MRP + Alpha




Two methods can be applied to discover the value of comparable companies,

specifically CoCo and CoTrans.

> CoCo / Comparable Company: if a comparable company is listed on a stock

exchange, we can determine the market capitalization of the company based on

the share price multiplied by the number of shares.

> CoTrans / Comparable Transaction: if a comparable company has recently

been sold, we can take the transaction price (if known) as a measure of the

value.

> EV / Enterprise Value: this is the debt and cash free value of a company. Boththe DCF(F) method and many multiples initially result in an EV, which must be

adjusted for the cash and debts. Only then is it possible to arrive at a value of the

shares.

> Discount / Premium: adjustments are still applied to the value of shares if the

transaction relates to a minority interest, a majority interest, a holding company

through which ownership is acquired indirectly, or shares without voting rights,

etc.

Studies of the level of the historical market risk premium

going back to before the First World War are available.






8Buy-out




Given the sharp growth in the activity of investment funds, it essential to

have a separate chapter on the sometimes very specific use of language in

the investment fund world. For clarity, we have made a distinction between

the terms associated with funds and the capital side of the investment and

the terms associated with debt financing.

8.1 PERSPECTIVE OF THE FUND

> Business Angels: investors who invest in a company at a very early stage. This

type of investor is often an individual or a small group of individuals.

> Venture Capital: this term is used for all investment funds. However, to

make a clear distinction between investment funds active in start-ups or

technologically uncertain companies and investment funds active in mature cash

flow generating companies, the term venture capital is being used to indicate the

first type of investment funds to an increasing extent. Buy-out funds and private

equity relate to the second type of investment funds.

In a buy-out, the management often also invests

on more favorable terms than the fund.

The remuneration of the fund management usually consists

of a management fee plus a fee related to the return

achieved by the fund, which is known as carried interest




> Private Equity (PE) fund: an investment fund active in mature cash flow

generating companies that also attracts debt financing for the acquisitions and

actively involves management in the acquisition.

> Buy-out fund: see also private equity.

> Hedge funds: funds that, unlike PE funds, also invest in assets other than

shares.

> Vulture funds: funds that are specialized in acquiring distressed companies.

> Special situation funds: in view of the negative connotations associatedwith the reference to vultures in the term ‘vulture fund’, these funds refer to

themselves more neutrally as special situations funds.

>Turn-around funds: see also vulture fund or special situations fund. This

name places the emphasis on the value created by restructuring the acquired

companies and making them profitable again (i.e. turning them around)

> MBO / Management Buy-out: a transaction in which the existing

management and an investment fund become co-owners of a company.

> MBI / Management Buy-in: a transaction in which a new management group

and an investment fund become co-owners of a company.

> LBO / Leveraged Buy-out: a buy-out partly financed with debt.

> Sweet Equity: to encourage management and bring its interests into line with

those of the investment fund, management is given the opportunity to invest

in the target company under special conditions. In this context, the relative

contribution per share is often lower for management than the amount paid by

the investment fund. The ratio of the effective price paid by management to the

price paid by the investment fund for their respective investments is sometimes

also called the ‘envy ratio’.




> Ratchets: ratchets are systems that are used to determine and change the

ratios of the shareholdings between different groups of shareholders. A ratchet

can make it possible, for example, for management to increase its share in theequity of a company if the company performs well. On the other hand, ratchets

can be used to ensure that the investment fund achieves a maximum return if

the company does not perform well.

> LP / Limited Partnership: Anglo-Saxon funds are often set up as tax

transparent limited partnerships with limited liability for the investors (the

limited partners). These limited partnerships are often offshore partnerships for

maximum legal flexibility.

> GP / General Partner: in order to maintain the limitations in liability as a

limited partnership, a fund must also have a general partner who has unlimited

liability. The general partner is associated with the management company of the

investment fund.

> Investment horizon: the period for which the fund intends to invest. There are

two types of funds in terms of horizon: open-end and closed-end.

> Closed-end fund: a fund with a limited investment horizon. Often, a few years

will be allocated for investing: several years for the growth of the company, and

several years for its sale. Closed-end funds seek to complete this entire cycle in

6-12 years.

> Open-end fund: a fund without a specific investment horizon.

> Co-investment: an investor who also invests in a specific buy-out alongside

the investment fund, in principle under the same conditions as the investment

fund.

> Carried interest: the management of a PE fund is usually paid a management

fee and a percentage of the added value that the fund realizes for its investors.

The percentage is usually paid after the investors have realized a specific return

( see also Hurdle). The fund’s share in the return is called the carried interest.




> Hurdle: the return that a fund must realize for its investors before the

management of the investment fund can share in the added value of the fund.

> Committed capital: the total amount that investors commit to the fund in

order for it to make investments during a specific period.

> Drawdown: once a fund has decided to proceed with an investment, the

investors are called upon to make the necessary money available. The drawdown

refers to the actual provision of money already been promised to the fund

(committed capital).

> Distribution: the payment of the returns achieved by the fund to the investors.

> Exit: when a fund steps down as an investor, this is referred to as exiting. At

the time of its investment in a company, the PE fund already considers how it

could sell back its shares in the company.

> Secondary buy-out: if one PE fund sells its investment to another PE fund,

this is known as a secondary buy-out.

> Club deals: an agreement in which various funds pool money with a view to

an investment that would not be possible on an individual basis because of the

amount involved or specific investment restrictions.

The exit is already considered at the time

the investment is made.




8.2 DEBT FINANCING

For a leveraged buy-out, debt financing is required in addition to a private

equity component. The debt financing of an acquisition is also a good

source of specific jargon used by bankers, investors and their advisors.

> Leverage: the degree of debt financing used for an acquisition.

> Acquisition finance: a specific term used for the debt financing of the

acquisition of a company.

> Stapled / debt package: a package of loans in various forms and with different

degrees of subordination, ranging from mezzanine to junior and senior debt.

> Mezzanine: an intermediate form of financing that has some of the

characteristics of capital and some of the characteristics of debt. This can

technically take the form of convertible debt, preferred shares or debt with

warrants.

> Junior debt and senior debt: a subordinated loan that is lower (junior)

or higher (senior) in priority, where the subordination refers to the order of

repayment in the event of the company’s bankruptcy.

> PIK / Payment in Kind: fixed-income securities that generate interest in the

form of additional debt instead of a sum of money. The final interest is only

payable on the final maturity date.

Mezzanine exists in many forms. It is important to

analyze the instrument properly and understand

what happens in which situation.




> Bulletloan: a form of debt in which the interest payment and the debt

redemption take place in full at the end of the loan.

> Grace period: the period during which no interest payments and/or debt

repayments need to take place.

> Debt syndication: if several banks underwrite the debt financing, they can

form a syndicate and as a result act jointly.

> Headroom: this term is sometimes used to refer to the difference between

the current performance of the company and the covenants.

> Covenants: the parameters used by banks to assess whether repayment is

threatened.

> Breach: if a covenant is not met and therefore a breach of covenant occurs, the

loan agreements may stipulate that the debt is immediately due and payable or

repayable.

> Euribor / Euro Interbank Offered Rate: This is a reference interest rate often

used as the basis for a variable interest rate.

> Basis points: hundredths of one percent of interest. The interest on a loan is

often expressed as EURIBOR plus a number of basis points.

> Hedging of interest risk: derivative financial instruments, such as interest rate

swaps, are used to convert a variable interest rate into a fixed interest rate.

For a leveraged buy-out, debt financing is required in addition to a

private equity component. The debt financing of an acquisition is

also a good source of specific jargon used by bankers, investorsand their advisors.










9Growth capital




If an investor increases the capital in a company in order to support growth

and in return receives a portion of the shares, this is called growth capital.

This situation can occur at companies at various stages of maturity, ranging

from start-ups to companies that are preparing for a subsequent stage in

their growth.

> Pre-money value: the value of the company excluding the value of the cash

paid when the capital is increased.

> Post-money value: the value of the company including the value of the cash

paid when the capital is increased. This value usually serves as a reference for

allocating shares.

> Shareholder agreement: an agreement in which the various shareholders

make agreements concerning matters such as voting rights at general meeting

and rights and obligations related to

the sale of packages of shares.

> Drag along: an obligation included

in the sharekholder agreement to sell

the shares if the other party also sells

its package of shares.

>Tag along: a right included in the

shareholder agreement to sell the shares if the other party also sells its package

of shares. In contrast to drag along, this does not involve an obligation but

merely a right.

An example

Where the pre-money value is 100 and the capital increase is 50, the

post-money value is 100+50 = 150.

This post-money value is usually used as a reference for the calcu-

lation of the share ratio. In that case, the subscriber to the capital

increase specifically has the right to 50/150 or 33% of the shares.

The drag along and tag along

arrange what happens if one

shareholder wants to sell.




> Blocking minority: the articles of incorporation of a company or company law

may provide that a special majority, e.g. 75%, is required at the general meeting

to make important decisions. This means that a minority shareholder who owns25% plus one share could block such decisions at the general meeting.

> A-shares, B-shares: in order to be able to grant different rights to different

groups of shareholders (e.g. founders, growth finance providers, etc.), several

types of shares are often created. For example, the articles of incorporation

could stipulate that the holders of B shares have the right to appoint two of the

five directors.

> Board seat: providers of growth capital often demand the right to berepresented in the board of management. The number of board seats is then

included in the negotiations on the terms of the capital increase, as are the

majorities required for taking certain decisions.

> Autofinancing capacity: A growing company has a need for investments,

including in operating assets and working capital. To a certain extent, a company

can finance its growth from its own operating cash flow. The extent to which

this is possible is called auto-financing capacity. However, if the company wants

to grow faster than its auto-financing capacity permits, it must attract externalfinancing.

> Anti-dilution: a clause in the financing contract that offers a certain protection

to a new financier. This clause states that if the reference value for determining

the number of shares issued in exchange for the capital increase would be lower

in a subsequent round of capital funding than in the current round of capital

funding, the existing financiers will receive additional shares to prevent dilution

(see also ratchet).

Anti-dilution clauses often limit

the level of dilution






10

Operational

elements of

the deal




In addition to the technical aspects of the deal, it is important to keep an

eye on what happens after the acquisition. This section therefore includes

a number of terms that require an active approach if you want to do

something about the morning-after feeling.

> Strategy: when initiating and implementing a deal, the underlying strategic

goal should always be borne in mind.

> PMI / Post Merger Integration: the proper integration of the acquired

company into the existing buying company has to be set up, planned and

monitored. One of the tools often used for this purpose is the 100 day plan.

> 100 day plan: a detailed plan that specifies what must happen during

the first 100 days following the acquisition. It is generally assumed that the

foundation for a successful integration must be laid in 100 days.

> Synergy: the term used to describe the value created by the merger of

two companies. This value can be found both on the cost side (e.g. cheaper

purchases thanks to combined purchasing power and cheaper administration due

to not doubling up on financial management) and on the revenue side (e.g. by

selling the products of one company to the customers of the other company).

> Announcement: an important part of the 100 day plan is the announcement

of the acquisition. This includes notifying the press as well as communicating

the consequences and the changes that this will entail to stakeholders (staff,

customers, suppliers, etc.).

An active post-merger integration is a healthy

remedy for the morning-after feeling.




> Serial deal maker: a company that frequently makes acquisitions.

> Closing dinner: the traditional dinner at which the deal teams of the buyer,seller, their advisors and financiers meet several weeks or months after the

transaction is completed.

> Fat lady: during negotiations there are frequent warnings about premature

optimism about the success of the transaction. “It isn’t over until the fat lady

sings” refers to the fact that the transaction is not complete until the final

agreement is signed.

>Tombstone: following the completion of the transaction, advisors or financiers

often have a Perspex trophy or, literally, a «tombstone» made to commemoratethe transaction. This tombstone is presented as a memento to the deal teams

and other advisors.

M&A is only one way to fulfill a strategic goal

and is rarely an end in itself.






11Capital markets




The term «capital markets» is often used to refer to everything involved in

trading shares, bonds and other long-term investments. In this context, the

financial markets («the stock exchange») are the means by which supply

and demand in various types of financial products are brought together.

> Bonds: bond loan: a marketable debt instrument for a loan entered into by

a government, a company or an institution as a source of financing. The buyer

of the bond receives an interest payment from the bond issuer in return for

furnishing the loan.

> Dilution: a decrease in the earnings per share due to an increase in the

number of shares over which the profit is distributed.

> Free float: the percentage of a company’s shares that is freely tradable on the

stock exchange.

> Broker: a term for a stockbroker who buys and sells shares on a stock

exchange on behalf of clients.

> Greenshoe (of over-allotment option): option reserved for the selling

shareholders to increase the number of shares offered in an IPO by a fixedamount in the event of oversubscription.

> IPO / Initial Public Offering: initial public

offering. In an IPO, or flotation, a company offers

its shares for sale on the stock exchange for the

first time. New shares are issued so that the

company can raise capital.

> Long/short position: going long, or having

a long position, means taking a position in

securities to speculate on an increase in the

price of the securities. The opposite of going

long is going short, which involves speculating on a decrease in the price of the

securities. This is done by selling shares that are not already owned but which

hopefully can be bought more cheaply at a later date.

An IPO usually

induces a change in

corporate culture and

a new responsibility tostakeholders.




> Bookrunner: usually an investment bank that arranges the subscription,

allocation and after-market for securities in an issue of securities.

> Market cap: the market capitalization of a listed company, i.e. the total value

of its shares, calculated on the basis of the price of the shares on the exchange,

multiplied by the number of outstanding shares.

> Poison pill: a hostile takeover can be made more difficult by granting

additional rights to certain existing shareholders. These rights can mean that a

capital increase is reserved for friendly parties by certain existing shareholders.

> Hostile take-over: a hostile bid. A bid for a listed company whose current

board of management is against the takeover.

> Underwriter: usually an investment bank that manages and underwrites the

public issue of shares or bonds. As part of this, the bank promises to buy any

shares that are not placed on the stock exchange.

> Euronext Brussel: the exchange of Brussels. On 22 September 2002, the

exchange merged with the exchanges of Paris, Lisbon and Amsterdam to create

Euronext NV, the first pan-European exchange for shares and derivatives. Its

name was changed to Euronext Brussels at that time. On 4 April 2007, EuronextN.V. merged with NYSE Group Inc. to create NYSE Euronext Inc.

The existence of a process of «poison pill» in the

statutes can affect stock prices.




> Institutional investor: an institution such as a pension fund or insurance

company that makes large investments and trades large quantities of securities,

often receiving preferential treatment and paying lower transaction commissions.

> Prospectus: a document required by law when issuing financial products (e.g.

shares, bonds, investment funds, etc.) which sets out the terms and conditions

of the issue.

> Lock-up arrangement: shares subject to a lock-up arrangement cannot be

traded before a certain date that is fixed at the time the relevant shares are

issued. When this period has expired, the shareholders can sell their shares.

> FSMA / Financial Services and Markets Authority: The FSMA, the successor

to the former Belgian Banking, Finance and Insurance Commission [Commissie

voor het Bank-, financie-en Assuratiewezen], is responsible for the supervision

of the financial markets and listed companies in Belgium, the approval and

supervision of certain categories of financial institutions, the monitoring of

compliance with rules of conduct by financial brokers and those marketing

investment products for the general public and the so-called social supervision of

supplementary pensions.

> Insider trading: prohibited trading with insider knowledge. This is the buying

or selling of shares by persons with access to information about the listed

company that is not publicly known.

> Fairness opinion: the additional opinion of an independent expert on the

value of a company or the assumptions used as a basis for the value. An expert

can assess whether the transaction terms and conditions, especially the price,

correspond with the underlying value of the company, and writes a report on

this.

> Private placement: in a private placement, the company raises capital by

selling shares privately to venture capital companies, private equity companies,

institutional investors and other investors, instead of holding a public offering of

shares.




> High-yield bonds: bonds issued by companies with a relatively low credit

rating or a high degree of risk. As the name indicates, these bonds have a

relatively high yield (return) because of the high risk. Also known as junk bonds.

> In the money: an option is ‘in the money’ if the price of the underlying

security on the stock exchange is higher than the strike price in the case of a

call option (‘right to buy’), or if the price of the underlying security on the stock

exchange is lower than the strike price in the case of a put option (‘right to sell’).

> MTN / Medium Term Note: This is comparable to a bond, but usually offers

a higher return than normal bonds and/or has a shorter maturity. Trading takes

place on the OTC (‘»Over The Counter») market.

> Naked: a naked, or uncovered, call option gives the purchaser the right to buy

shares that are not yet in the possession of the writer.

> Penny stocks: a name for shares with a very low absolute price on the stock

exchange.

> Rating: an assessment of the creditworthiness of a company by a rating

agency such as Moody’s, S&P or Fitch.

> Option: the right to buy or sell a security at a specific price.

> Warrant: a warrant gives the holder the right, but not the obligation, to

subscribe to a capital increase at a predetermined price on or before a specific

date. This is a commonly used alternative to options in employee ownership

schemes, because the company does not need to possess any of its own shares

since new shares will be created when the warrant is exercised.






Index

#

100 day plan: 62

A

Acquisition: 5

Acquisition finance: 52

Alpha: 44

Announcement: 62Anti-dilution: 59

Anti-trust fifiling: 7

A-shares, B-shares: 59

Asset deal: 14

Auditor: 38

Autofifinancing capacity: 59

B

Bank guarantee: 9Basis points: 53

Basket: 9

Belgian GAAP/Belgian General

Accepted Accounting Principles: 22

Beta (levered/unlevered): 44

Blocking minority: 59

Board seat: 59

Book runner: 67

Branch: 15

Breach: 53

Broker: 66

Bullet loan: 53

Business angels: 48

Buy-out fund: 48

C

CAPM/Capital Asset Pricing Model: 44

Carried interest: 50

Change of Control Clauses: 15

Clean team: 30

Closed-end fund: 50

Closing accounts: 22

Closing agreement: 7

Closing date: 19

Closing dinner: 63

Club deals: 51

CoCo/Comparable Company: 45CoE/Cost of Equity: 43

Co-investment: 50

Commercial due diligence: 28

Committed capital: 51

Cost of debt: 43

CoTrans/Comparable Transaction: 45

Covenants: 53

Crowdfunding: 54

CP/Condition Precedent: 7

D

Data room: 30

Data Room Rules: 30

DCF(F)/Discounted Cash Flow (to the

Firm): 43

Deal advisor: 38

Deal structuring: 15

Debt and cash free: 21

Debt push down: 15

Debt syndication: 53

Defined benefit plan: 28

Defined contribution plan: 28

Dilution: 66

Disclosures: 9

Discount/Premium: 45




Distribution: 51

Drag along: 58

Drawdown: 51Due diligence: 25

Due diligence provider: 38

E

Earn-out: 22

EBIT/Earnings Before Interest and Tax:

43

EBITDA/Earnings Before Interest, Tax,

Depreciation and Amortization: 42EBITDAR/Earnings Before Interest,

Tax, Depreciation, Amortization and

Rent: 42

E-data room: 30

Environmental due diligence: 29

Envy ratio: 47

Escrow: 9

Euribor: 53

Euronext Brussels: 67

EV/Enterprise Value: 45

Exclusivity: 6

Exit: 51

F

Fat lady: 63

Fairness opinion: 68

Fees: 39

FFF: 54

Financial assistance: 16

Financial due diligence: 28

Franchise: 10

Free Cash Flow: 43

Free Float: 66

FSMA: 68

G

Goodwill: 42

GP/General Partner: 50

Grace period: 53

Green shoe: 66

Guarantees: 8

H

Headroom: 53

Heads of agreement: 7

Health and safety: 29

Hedge funds: 49Hedging of interest risk: 53

High yield bonds: 69

Hold harmless letter/approved reader

letter: 30

Hostile takeover: 67

Hurdle: 51

I

IFRS/International Financial ReportingStandards: 22

Indemnities: 8

Info Memo/Information

In the money: 69

Memorandum: 34

Insider traping: 68

Institutional investor: 68

Insurance due diligence: 29

Investment horizon: 50

IPO: 66

IPO/Initial Public Offering: 49

J

Junior debt and senior debt: 52




L

Lawyer/M&A lawyer: 38

LBO/Leveraged Buy-out: 49

Leakage: 16

Legal continuity: 14

Legal due diligence: 26

Leverage: 52

List of parties: 38

Locked box: 23

LOI/Letter Of Intent: 6

Long list: 34

Long/Short position: 66LP/Limited Partnership: 50

Luck-up arrangement: 68

M

MAC/Material Adverse Change: 7

Market CAP: 67

MBI/Management Buy-in: 49

MBO/Management Buy-out: 49

Merger: 5Mezzanine: 52

Minimis: 12

MOU/Memorandum Of

Understanding:6

MRP/Market Risk Premium: 44

MTN: 69

Multiple: 44

N

Naked: 69

NDA/Non Disclosure

Agreement: 6

Net debt: 21 (Non) Binding: 7

NOPAT/Normalized Operating Profit

After Tax: 43

Normalized Working Capital: 21

O

Offer letter: 6

Open-end fund: 50

Operations and synergy due diligence:

29

Option: 69

P

PAT/Profit After Tax: 43

PBT/Profit Before Tax: 43

Penny Stocks: 69

Pensions due diligence: 28PIK/Payment in Kind: 52

PMI/Post Merger Integration: 62

Poison pill: 67

Post money value: 58

Pre money value: 58

Private Equity (PE) fund: 49

Private placement: 68

Process letter: 34

Prospectus: 68

R

Ratchets: 50

Rating: 69

REBITDA/Recurring Earnings Before

Interest, Tax, Depreciation and

Amortization: 42

Release/reliance (for financiers): 29

Representations: 8

Retainer fee: 39

RF/Risk Free Rate: 44

S

Secondary buy-out: 51

Serial deal maker: 62

Share deal: 14




Shareholder agreement: 58

Short list: 34

SPA/Share Purchase Agreement: 7Special situation funds: 49

Specialist advisors: 38

Spread payment: 23

Stapled/debt package: 52

Strategy: 62

Success fee: 39

Sweet Equity: 49

Synergy: 62

T

Tag along: 58

Target Working Capital: 22

Tax due diligence: 28

Tax treatment: 14

Teaser/blind profile: 34

Threshold: 9

Time and expense based fee: 39

Tombstone: 63

TUPE: Transfer of Undertakings

(Protection of Employment): 15

Turn around funds: 49

U

Underwriter: 67

V

VDD/Vendor (initiated) Due Diligence:

35

Vendor loan: 21

Vendor note: 21

Venture Capital: 48Vulture funds: 49

W

WACC/Weighted Average Cost of

Capital: 43

Warrant: 69

Warranties: 8

Working Capital: 21





Jorn De Neve

Partner

Corporate Finance

[email protected]+32 708 47 78

Luc Heynderickx

Partner

M&A Tax

[email protected]

+32 2 708 38 16

Peter Lauwers

PartnerCorporate Finance

[email protected]

Wouter Caers

Partner

M&A Tax

[email protected]+32 3 821 19 73

Wouter Lauwers

Partner

Klaw advocaten/avocats

[email protected]

+32 2 708 38 68

Yann Dekeyser

PartnerTransaction Services

[email protected]

Your M&A Team

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