M&A Process Terminology List

M&A Process Terminology List

Two people using M&A process terminology during a merger of acquisition.

This guide is designed to familiarize entrepreneurs and non-finance professionals with the "language" of mergers and acquisitions. It highlights some key terminology used repeatedly in M&A deals. It's important for both entrepreneurs and consultants to understand the terminology used in these deals. Here are some good reasons to familiarize yourself with these terms:

  • It's harder to negotiate when you don't fully understand the terminology and jargon used in the discussion.
  • Familiarizing yourself with these terms (and the M&A process) will illuminate the deal-making process and empower you to think more clearly.
  • There is more to an M&A deal than the purchase price. Understanding the terminology used in an M&A deal will help you to negotiate better transaction terms for the deal.

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M&A Process Terms:

Here is a list of important terminology for understanding mergers and acquisitions. This list of terms is designed to help familiarize you with the “language” of M&A. To learn more about how the M&A process works, read our guide: The M&A Process Explained.

  • Acquirer – The firm that is purchasing another business in this M&A transaction. The acquirer is the buyer.
  • Target – The company that is being acquired by the buyer. The target company is the seller.
  • Merger – When a purchasing company acquires all of another business’s (the target’s) assets or shares (see asset purchase vs stock purchase) and the target is dissolved. The acquirer remains and now owns what the target company used to own—and the target company ceases to exist.
  • Acquisition – An acquisition is when the acquirer (buyer) buys the majority stake in another company (the target) and both companies continue to exist independently, but the acquirer is the new owner of the target business.
  • Offer Price – This is the price offered by the acquirer (buyer) in exchange for the target company (business being sold).
  • Synergies – Simply put this is how the acquirer looks at cost savings and additional revenue opportunities that will come about as a result of this deal. These are a large part of the “reason why” they are doing this M&A deal. These cost savings (called hard synergies) and revenue enhancements (called soft synergies) are what is hoped to be achieved as a result of this M&A transaction.
  • Timing of Synergies – This is a timeframe for synergies. It’s an estimate of how long it will take to realize the benefit from the synergies of the M&A deal.
  • Asset Purchase/Sale – This is when the buyer and seller agree to structure the deal in a way that has the acquirer purchasing only the assets of the target company (they don’t buy the company’s shares).
  • Stock Purchase/Sale – This is when the buyer and seller agree to structure the deal in a way that has the acquirer purchasing the shares of the target company outright.
  • Takeover Premium – The price the acquirer offers to pay above the target company’s current share price. Looked at as a percentage.
  • Goodwill – The amount the acquirer paid over the target company’s net assets after fair value adjustments are made. For more see: what is goodwill in accounting?.
  • Intrinsic value – The estimated value of the business using DCF (discounted cash flow) analysis.
  • Net Book Value – This is the book value of the target company’s assets minus their book value of liabilities.
  • Fair Value Adjustments - This is the increase/decrease of the net book value assets (above) that arrives at fair market value (see goodwill term to understand why this is important).
  • Transaction Close Date – This is the date when the deal is closed officially. This is often set in expectation but refers to when the deal officially closes.
  • Restructuring Charges – These are fees related to debt repayment as part of the restructuring.
  • Cash Consideration – How much of the purchase price the acquirer will give to the target company in cash.
  • Stock Consideration – How much of the purchase price will be paid for in shares of the acquirer’s stock.
  • Equity Issuance Fees – The fees for underwriting that are charged by investment banks for issuing equity for this transaction.
  • Debt Issuance Fees – The fees for underwriting that are charged by investment banks for issuing debt for this transaction.
  • Additional Fees – There are also due diligence fees, and accounting and legal fees associated with the M&A transaction.

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