LEXICON
A BSA
Warrants. A structured product allowing shareholders to purchase a share at a predetermined price during a specified period. It is often used to motivate management during a leveraged buyout (LBO) by making the achievement of set objectives a condition for exercising the warrants.
CONFIDENTIALITY AGREEMENT / NDA
A confidentiality guarantee to which the potential buyer commits to protect the information provided during the review of the file, frequently accompanied by other commitments towards staff and clients.
A UDIT/DUE DILIGENCE
Audit and studies conducted by a buyer within the company to verify accounting, financial, commercial and social elements.
B IMBO (Buy-In Management Buy-Out)
LBO buyout operation involving a team of buyers composed of the existing management in the target company and/or external managers.
B UILD UP
External growth policy.
B USINESS PLAN
Company presentation document with a projection over 3 to 5 years.
C STARTING CAPITAL
Capital for start-up companies, most often provided by Business Angels. A preliminary phase to venture capital.
INVESTOR CAPITAL
Financial institution specializing in entrepreneurial investment (LBO/growth capital/venture capital...).
RISK CAPITAL
Equity investment, downstream of seed capital.
TARGET
Company targeted during an external growth operation. The target may be potential or declared (if it is known that it is seeking to be acquired).
C LOSING
Operations to finalize a transaction and transfer securities and/or funds.
BANKING AGREEMENT
Loan clause in an LBO transaction that allows the lender to demand early repayment of loans if the company's financial forecasts are not met and if the borrower's financial structure deteriorates (failure to meet ratios).
D ATA ROOM
A place where all the company's documents are gathered to allow the potential buyer to assess the risks and form an opinion.
THIS SENIOR
In an LBO transaction, it refers to the debt contracted by the acquisition holding company from banking institutions for the acquisition of the target company, which allows for leverage.
E ARN OUT
Price adjustment clause which consists of paying a supplement to the price paid to the seller after the sale (indexation of all or part of the sale price of a company on its future performance turnover, profit, ...).
E BIT (Earning Before Interests and Taxes)
Operating profit reduced by employee profit sharing.
E BITDA
Earnings Before Interest, Taxes, Depreciation and Amortization. Operating profit less employee profit-sharing before taxes, depreciation and amortization charges.
Enterprise Value (EV )
Value of securities adjusted for cash and debt (debt-free/cash-free value).
E QUITY
Equity investments. Equity is one of the components of a financial structure, along with mezzanine financing and debt. Equity represents the value of a company's shares/stocks, as opposed to enterprise value.
GUARANTEE OF LIABILITIES AND ASSETS
Guarantee given by the transferor to the purchaser on all unrecorded or undervalued liabilities, as well as on the existence and value of the assets in the accounts used as the basis for the transaction.
H ANDS-ON / HANDS-OFF
Characterizes how investments are monitored. The "hands-off" approach signifies control and an active presence in the company, as opposed to the "hands-off" approach, which, at the extreme, characterizes a sleeping partner position.
L BO (LEVERAGED Buy Out)
Business takeover with leverage using senior or mezzanine debt.
L EVERAGE MANAGEMENT BUY IN (LMBI)
Acquisition of a company with leverage by a management team external to the existing management team.
L EVERAGE MANAGEMENT BUY OUT (LMBO)
Leveraged buyout of a company by the existing management team.
L OI (Letter Of Intent)
Also called a letter of interest or letter of intent, in which the potential buyer outlines the contours of their proposal, usually accompanied by conditions precedent.
O BO (Owner Buy Out)
The managing shareholder sells a portion (majority or minority) of the capital of his company to an investor, via a takeover holding company.
PATIENCE
Bonds with Warrants. This structured product allows the bondholder to purchase shares of the issuing company during a specified period and at a predetermined price. This system enables an investor to transition from bondholder to shareholder.
O C
Bonds convertible into shares.
O PEN BID
Sale of a company organized by an advisory bank or a merger and acquisition firm as a private auction, with buyers carefully selected and the procedure strictly defined.
P ER (Price Earning Ratio)
Ratio used for company valuation. Primarily concerns listed companies. For unlisted companies, "multiples" are preferred.
P RE-CLOSING
Exchange phase between future shareholders, sellers and financial intermediaries of the legal documentation that will be signed at closing.
P ROTOCOLE D'AGORD
Defines a process, a timeline and the main terms of agreement subject to the results of an audit.
P URCHASE AGREEMENT
A document typically prepared by the buyer's law firm outlining the agreement between the target company and the buyer. It contains all the terms of the acquisition for both parties: share exchange, cash payment, payment schedule, clauses regarding the retention of existing shareholders in the new capital structure, etc.
IRR (Internal Rate of Return)
The rate that makes the net present value of an investment equal to zero. It therefore corresponds to the real rate of return on an investment.
The IRR achieved by a venture capitalist takes into account the negative cash flows related to successive capital calls and the positive cash flows related to distributions (in cash and sometimes in securities), as well as the net asset value of the units held in the investment vehicle at the calculation date. This rate includes management fees, carried interest, the impact of cash flow, and the time effect.