Business Valuation & Transaction Glossary

A business valuation method that calculates value based on the company's total assets minus its liabilities. Most appropriate for asset-heavy businesses or liquidation scenarios.

A professional intermediary who assists in the buying and selling of businesses, providing services such as valuation, marketing, buyer qualification, and transaction facilitation.

A valuation method that multiplies a business's annual cash flow (typically EBITDA) by an industry-specific multiple to determine business value.

The comprehensive investigation and analysis of a business's financial, legal, and operational aspects conducted by potential buyers before completing a purchase.

Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company's operating performance and cash flow generation capability.

A deal structure where part of the purchase price is contingent on the business achieving specific performance metrics after the sale.

The total value of a business, including equity value plus debt, minus cash and cash equivalents. Represents the theoretical takeover price.

An intangible asset representing the excess of purchase price over the fair value of identifiable net assets, often including brand value, customer relationships, and reputation.

A preliminary agreement outlining the key terms and conditions of a proposed business acquisition, typically non-binding except for certain provisions.

An acquisition strategy where a significant portion of the purchase price is financed through debt, with the acquired company's assets serving as collateral.

Valuation ratios derived from comparable public companies or recent transactions, used to estimate a business's value relative to financial metrics.

Current assets minus current liabilities, representing the short-term liquidity and operational efficiency of a business.

A legal contract that protects confidential business information shared during the evaluation and negotiation process.

A measure of cash flow that includes the owner's salary, benefits, and discretionary expenses, representing the total economic benefit to a single owner-operator.

The process of assigning the purchase price to specific assets and liabilities acquired, important for tax and accounting purposes.

An analysis that examines the sustainability and reliability of a company's reported earnings, identifying one-time items and accounting irregularities.

The process of adjusting historical financial statements to reflect the true economic performance by removing owner-specific expenses and one-time items.

A valuation method that multiplies annual revenue by an industry-specific multiple to estimate business value, commonly used for early-stage or high-growth companies.

Small Business Administration guaranteed loans that provide favorable terms for business acquisitions, typically requiring lower down payments and offering longer repayment periods.

A financing arrangement where the business seller provides a loan to the buyer for a portion of the purchase price, often used to bridge financing gaps.

The additional value created when two businesses combine, resulting from cost savings, revenue enhancements, or operational improvements.

The estimated value of a business beyond the explicit forecast period, typically calculated using a perpetual growth rate or exit multiple.

Financial data covering the most recent 12-month period, providing current performance metrics regardless of fiscal year timing.

A ratio used to value a business by comparing it to similar companies or transactions, such as Price/Earnings or EV/EBITDA ratios.

The average rate of return a company must pay to finance its assets, used as a discount rate in discounted cash flow valuations.