Index
-
- Page numbers followed by f and t refer to figures and tables, respectively.
-
- ABA (American Bar Association), 122
- ABL (asset‐based lending), 246–247, 378
- Accelerated Cost Recovery System (ACRS), 302
- Accelerated depreciation, 282, 377
- Accounts payable, 189–190
- Accounts receivable, 188–189
- Accredited investor, 326, 377
- Accretion/dilution analysis, 137–138
- Accrued payroll items, 190
- Acquisition(s):
- ACRS (Accelerated Cost Recovery System), 302
- Add‐on, See Bolt‐on
- Adjusted EBITDA, 25, 202
- Adjusted taxes, 73
- Adjusted working capital, 377
- Advertising, of M&A practice, 81
- Advisers Act (Investment Advisers Act of 1940), 345–346
- Advisory fees, 87
- Affiliated person, 377
- Agency costs, 232–233
- Aggregated data, 160
- AI (artificial intelligence), 163, 165–167
- Alignment of interests, 147–148
- Alliance of Merger & Acquisition Advisors (AM&AA), 175
- Alliances, 59
- Alternative asset classes, 378
- Alternative consideration, 118
- AM&AA (Alliance of Merger & Acquisition Advisors), 175
- American Bar Association (ABA), 122
- Amortization:
- Antidilution, 378
- Antifraud provisions, of 33 Act and 34 Act, 343
- Antitrust laws, 331–333
- Appraisal(s):
- Appraisal report, 378
- Appraisal rights, 378
- Artificial intelligence (AI), 163, 165–167
- Asset(s):
- capitalization of, 302
- fixed, 190–191
- hot, 395
- income from unrelated, 182
- intangible assets (See Intangible assets)
- mark‐to‐market distribution of, 291
- personal, 192
- preparing to transfer, 69
- qualifying assets for installment method, 288–289, 305–306
- retained, 223
- selecting which to sell, 215
- total, 73
- and transfer of ownership, 69
- Asset allocation, 282–283, 302
- Asset‐based lending (ABL), 246–247, 378
- Asset Purchase Agreement (APA), See Definitive Agreements
- Asset subworld:
- Asset transaction:
-
- Bad actor disqualifications, 328–329
- Balance sheets, 105
- Balance sheet analysis, 184–193, 260
- Banks and banking:
- Bankruptcy, 378–379
- Basis points, 379
- Baskets, 321, 379
- BDC, See Business development company
- Behavioral risk/return, 19–20
- Below‐market compensation, 183
- Benefits, 263–264
- Benefit stream, 42, 197, 199–205
- Beta, 379
- Bid drafts, 119–120
- Bidders, multiple, 71–72
- Bidding, 141
- Binding provisions, of LOIs, 116, 313–314, 314t–315t
- BIS (Bureau of Industry and Security), 333
- Blind summaries, 102, 107, 108
- Blue‐sky laws, 91, 354–355, 379
- Boards of advisors, 379
- Boards of directors, 141, 147, 379
- Boat anchors, 379
- Bolt‐on, 153, 379
- The Book, 102. See also marketing book
- Book summaries, 102
- Book value, 39
- Boot, 294, 379
- Bottom‐up revenue and expense forecasts, 65
- Breakeven, 379
- Breakout strategies, 63
- Bridge financing, 247, 379–380
- Broad auction, 112
- Broad‐based weighted average ratchet, 380
- Broker‐dealer:
- Brookings Institution, 5
- Built‐in gains, 292–293
- Built‐in gains tax, 300–302, 306
- Built‐in losses, 302
- Bulk sales laws, 334–335
- Bureau of Customs and Border Protection, 334
- Bureau of Industry and Security (BIS), 333
- Burn rate, 380
- Business brokers, 78, 79t
- Business considerations:
- Business cycle, 52–53
- Business development company (BDC), 24, 246, 380
- Business development teams, 133
- Business due diligence, 267–270
- Business structures, 380–382
- Buy‐n‐build, 382
- Buy‐sell agreement, 382
- Buy‐side representation, 151–156
- Buyer(s):
- asset transactions and taxation, 275, 276t, 279
- benefits of F reorganization for, 222
- as clients, 151–152
- debt and equity of, 193
- favorable allocation to, 283
- financial analysis for, 193
- financing of, 117
- identification of, 100–101
- initiating contact with, 107–108
- interest of, 113–120
- maintaining contact with prospective, 108–109
- risk viewed by, 20–26
- stock transactions and taxation, 277, 279
- synergies for, 193
- tax provisions for, 285–287
- types of, 20–26
-
- C corporation, 380
- CAB (capital acquisition broker), 347–350, 382
- CAB Rule 016, 348
- California Business and Professions Code, 342n†
- Caps, 321, 382
- CapEx, See Capital expenditures
- Capital:
- access to and use of, by middle market companies, 8
- laws concerning the raising of, 323–324
- providers of, 17–18
- working (See Working capital)
- Capital acquisition broker (CAB), 347–350, 382
- Capital asset pricing model (CAPM), 382
- Capital call, 382–383
- Capital charge, 383
- Capital efficiency, 383
- Capital expenditures (CapEx), 383
- Capital gains, 383
- Capital leases, 248
- Capital losses, 383
- Capital markets, 11
- Capital stock, 383
- Capital structure:
- Capitalization rate, 15
- Capitalization table (cap table), 383
- CAPM (capital asset pricing model), 382
- Capped participating preferred, 383
- Carried interest, 383
- Cash balances, 192
- Cash cow, 383–384
- Cash flow, 56–57, 384
- Cash‐free debt‐free, 185, 384
- Catch‐up, 384
- CBR (confidential business report), 102. See also marketing book
- Certified Merger & Acquisition Advisor (CM&AA), 175, 384–385
- CFq (Corporate Finance Qualification), 384
- CFIUS (Committee on Foreign Investment in the United States), 369
- Change of control, 384
- Change of control bonus, 384
- Charitable remainder trust (CRT), 384
- CIM (confidential information memorandum), 102, 385–386. See also marketing book
- Clawbacks, 384
- Clayton Antitrust Act, 331
- Client acceptance, 83
- Client engagement, 84–91
- Closing, 122–125, 384
- Closing bonus, 89
- Cloud computing, 158
- CM&AA (Certified Merger & Acquisition Advisor), 175, 384–385
- CMS (comprehensive M&A software), 164–165
- Cognitive search platforms, 163
- COGS (cost of goods sold), 387
- Collateral, 252, 385
- Collateral value, 39
-
- Comfort letters, 154, 385
- Commercial banks, 246, 385
- Commitments, 154, 385
- Committee on Foreign Investment in the United States (CFIUS), 369
- Common stock, 241, 385
- Communication:
- Company(‐ies):
- business development companies, 24, 246, 380
- and capital structure, 235–236
- emerging growth companies, 129, 134, 231, 233, 234, 390
- limited liability companies (See Limited liability companies)
- lower‐middle market companies, 8–9, 13–14, 16t
- middle‐middle market companies, 14, 16t
- portfolio companies, 153, 405
- private, 192
- privately‐held companies, 341
- public companies, 355–357
- regulatory perspectives of, 350–351
- reporting companies, 355–356
- small business investment companies, 24, 246, 346, 412
- special purpose acquisition companies, 25–26, 353–354, 412
- upper‐middle market companies, 8, 9, 14
- Company foundation, 53
- Company information, 161
- Company profile, 102. See also marketing book
- Comparable, 385
- Compensation:
- Competence, 173
- Competition, in M&A transaction process, 71–72
- Competitive intelligence, 161–162
- Compliance. See also Regulation and compliance
- Comprehensive M&A software (CMS), 164–165
- Concentrations, 65–66
- Conditions, changes in, 123
- Conduct of business provisions, 314t
- Confidential business report (CBR), 102. See also marketing book
- Confidential information memorandum (CIM), 102, 385–386. See also marketing book
- Confidentiality, 84
- Confidentiality agreements, 311–312
- Congressional Caucus for Middle Market Growth, 4
- Consequential damages, 386
- Consolidation, 52
- Consulting agreements, 281, 321–322
- Consulting allocations, 283
- Consulting services, 82
- Contingent value rights (CVRs), 386
- Contracts:
- Contributing mergers, 294
- Contribution agreement, 228
- Contribution margin, 60, 386
- Contributions to corporations, 294, 302
- Control, 386
- Convergence, 386
- Conversion, 386
- Convertible debt, 386
- Convertible preferred stock, 386
- Convertible securities, 386
- Coordination, 156
- Core business:
- Corporate development team, 127–128
- Corporate finance, 12, 387
- Corporate Finance Qualification (CFq), 384
- Corporate liquidation, 387
- Corporate resolution, 387
- Corporate structure, 70
- Corporate venturing, 387
- Corporations, 380
- Cost of goods sold (COGS), 387
- Cost of revenue, 387
- Cost of sales (COS), 387
- Cost savings, 204
- Cost segregation studies, 287, 302–303
- Cost structure, 60, 226–227
- Country risk, 365
- Covenants, 281, 387
- Covered transactions, 286
- Covid‐19 pandemic:
-
- D/E (debt‐to‐equity) ratio, 388
- Data:
- Deal structure, 213–228
- Dealer, See Broker‐dealer
- Debt:
- Debt‐for‐equity swap, 388
- Debt service, 388
- Debt‐to‐equity (D/E) ratio, 388
- Deductibles, 321
- Default, 388
- Defense Production Act, 333
- Deferred compensation, 283
- Deferred payment terms, 117, 216, 288
- Deferred revenue, 188
- Deficiency guaranty, 388
- Definitive agreements, 121–122, 388
- Demand right, 388
- Department of Justice, 331, 332
- Depreciation:
- DFCF (discounted free cash flow), 388
- Digital disruption, 52
- Dilution, 70–71, 388
- Directorate of the Defense Trade Controls, 334
- Disbursement, 388
- Disclosures:
- Disclosure of terms of deal provisions, 315t
- Disclosure schedules, 319–320
- Discontinued operations, 182
- Discount rate, 15, 389
- Discounted cash flow (DCF), 389
- Discounted free cash flow (DFCF), 389
- Discounting, 210
- Discretionary business practices, 201
- Discretionary items, 201
- Dismal Ds, 130–131
- Distribution, 389
- Divestiture, 389
- Dividend yield, 389
- Dividends, 389
- Divisive D reorganizations, 299, 303
- Dodd‐Frank Wall Street Reform and Consumer Protection Act of 2010, 346
- Domain expertise, 389
- Double Lehman, 88
- Double taxation, 272, 274, 389
- Down round, 389
- Drag‐along rights, 389
- DSO (days sales outstanding), 388
- Due diligence, 255–270, 389
- Due diligence software, 163
-
- Earnings before interest, taxes, depreciation, and amortization (EBITDA), 390
- Earnings before interest and taxes (EBIT), 390
- Earnings per share (EPS), 137
- Earnouts, 118–119, 140, 216–217, 389
- EBIT (earnings before interest and taxes), 390
- EBITDA, See Earnings before interest, taxes, depreciation, and amortization
- EBITDAC (earnings before interest, taxes, depreciation, amortization and COVID), 390
- Economic considerations:
- Economic profit, 390
- Elevator pitches, 390
- Emerging growth company, 129, 134, 231, 233, 234, 390
- Employees, 6. See also Key employees
- Employee‐related items, 201
- Employee stock ownership programs (ESOPs), 390
- Employment agreements, 321–322, 390
- Employment considerations:
- Engagement letter, 84–91
- Enjoyed synergies, 202, 203
- Environmental, social, and governance (ESG), 50–51, 269
- EPS (earnings per share), 137
- Equipment, 269
- Equipment financing, 247
- Equity, 390
- Equity structure, 265
- Escrow, 390
- ESG (environmental, social, and governance), 50–51, 269
- ESOP (employee stock ownership program), 390
- Ethics, 169, 174. See also Professional standards
- European Union, 368
- Evergreen funds, 390
- Excess cash, 73
- Excess owner compensation, 181
- Exchanges:
- Exclusivity provisions, of letters of intent, 115–116, 313, 315t
- Exit alternatives, 390
- Exit planning, See Transition, succession, and exit planning
- Exit strategies, 390
- Exon‐Florio provision, 333
- Expansion stage, 391
- Expected cash flow, 56–57, 72
- Expense provisions, 315t
- Expertise, developing, 82–83
-
- F reorganization, 221–222, 300, 303
- Facilities, 269
- Factoring, 391
- Fair market value, 32, 33, 37, 300, 301
- Fair value, 37–38
- Fairness hearing, 391
- Fairness opinion, 391
- Family limited partnerships (FLPs), 381
- Family office, 24–25
- FAS 141R, 285
- FASB (Financial Accounting Standards Board), 391–392
- FCPA (Foreign Corrupt Practices Act), 369
- Federal Trade Commission, 331, 332
- Fee structures:
- Fiduciary guarantee, 252
- Filters:
- Financeable value, 244
- Financial Accounting Standards Board (FASB), 391–392
- Financial analysis, 179–193
- Financial buyers (financials), 21t, 22–25, 36, 127, 152, 256–257, 267
- Financial disclosures, 105
- Financial engineering, 392
- Financial Industry Regulatory Authority, See FINRA
- Financial information, 68–69, 258
- Financial intermediaries, 392
- Financial investors, 392
- Financial models, for merger, 228
- Financial reporting:
- Financing statements, 392
- Finders, 344–345
- FINRA (Financial Industry Regulatory Authority), 91, 347–350, 392
- FINRA Rule 2210, 348
- Fire sales, 392
- Firm commitments, 135, 392
- Five Forces framework, 58
- Fixed‐amount success fees, 88
- Fixed assets, 190–191
- Fixed charge coverage ratio, 392–393
- Fixed rates, 89
- Flipping, 393
- Flow‐through entities, 276
- FLPs (family limited partnerships), 381
- Forecasted financial statements, 106
- Foreign investors, 333–334
- Foreign trade, 333–334
- Forfeiture, risk of, 288, 304
- Form 8K, 356
- Form 8594, 280, 281
- Form D, 327, 351–352
- Form S‐1, 351, 393
- Form S‐4, 351
- Form U7, 328
- Formal auctions, 112
- Forward contracts, 393
- Forward triangular mergers (Type A), 297
- Founders, 393
- Fraud guarantee, 252
- Free cash flow, 393
- Friends and family financing, 393
- Full ratchet, 393
- Fully diluted basis, 393
- Fund of funds, 394
- Fundamental rep, 393–394
- Funded debt, 394
- Funds, use of, 236
-
- GAAP, See Generally Accepted Accounting Principles
- Gain tracking rules, 292–293, 305
- GDP (gross domestic product), 13, 14
- General partners (GPs), 289, 381
- Generally Accepted Accounting Principles (GAAP), 394
- George J. Staab v. Commissioner, 305
- Germany, 4, 370
- Going‐concern value, 394
- Going‐private transactions, 357
- Golden parachutes, 394
- Goodwill, 40, 41, 284–285, 301, 305
- Gordon Growth Model, 56n*
- Governance, 9
- GPs (general partners), 289, 381
- Great Recession, 28
- Greenmail, 394
- Gross domestic product (GDP), 13, 14
- Gross margin, 204–205, 394
- Grossing up, 220, 394
- Growth CapEx, 394
- Growth equity funds, 249
- Growth rate, 72
- Growth stage, 236, 394
- Growth toolbox, 361, 362t
- Guarantee of collection, 251–252
- Guarantee of payment, 251–252
- Guaranteed debt, 192
-
- Hair on the deal, 394
- Haircuts, 138, 394
- Hamburger Helper bridge, 395
- Handbook of Financing Growth: Strategies, Capital Structure, and M&A Transactions, 207, 245
- Hard synergies, 204
- Hart‐Scott‐Rodino Act (HSR), 332–333, 395
- Harvest, 395
- Heads of agreements (HOAs), 395
- Hedges, 395
- HOAs (heads of agreements), 395
- Hockey sticks, 395
- Hofstede Insights, 365
- Holding periods, 395
- Hospital Corporation of America v. Commissioner, 287, 303
- Hot assets, 395
- Hot issues, 395
- HSR (Hart‐Scott‐Rodino Act), 332–333, 395
- Human capital, 40, 61
- Hurdle rate, 395
-
- IARD (Investment Adviser Registration Depository), 346
- IASB (International Accounting Standards Board), 397
- ICAEW White Paper, 165
- IFRS, See International Financial Reporting Standards
- Inbound M&A, 359
- Incidental damages, 395–396
- Income from unrelated assets, 182
- Incremental business value, 38
- Indemnification, 320–321, 396
- Independent sponsor, 24
- Indications of interest (IOI), 114, 135–136, 154
- Indicative offer, 396
- Individual buyers, 20, 21t, 22
- Individual capital gains rate, 304
- Indopco v. Commissioner, 286, 302
- Industry cycle, 51–52
- Industry information, 161
- Industry research, 100–101
- Industry transaction activity, 71
- Information:
- Information asymmetry, 396
- Initial public offerings (IPOs), 396
- Inside rounds, 396
- Insider information, 396
- Insiders, 396
- Insolvency risk, 396
- Insolvent, 396
- Installment sale, 396
- Intangible assets:
- Integration:
- Integration leader, 145
- Intellectual capital, 39–40
- Intellectual property (IP), 69, 265
- Interest, 135–136, 396
- Interest coverage ratio, 396
- Interest coverage test, 397
- Interest deduction, 397
- Interest expense, 201, 397
- Interest in arrears, 397
- Interest income, 202
- Interest‐only loan, 397
- Interest tax shield, 397
- Interim statements, 397
- Internal finance, 397
- Internal growth rate, 397
- Internal rate of return (IRR), 397
- Internal Revenue Code, 220
- definitions relevant to, 302–306
- Section 197, 303
- Section 263, 302
- Section 338, 295–296
- Section 338(g), 295, 296
- Section 338(h)(10), 220, 221
- Section 351, 294
- Section 355, 303
- Section 368(a)(1), 296
- Section 368(a)(1)(F), 221
- Section 409A, 283
- Section 721, 220–221
- Section 754, 291, 293
- Section 1060, 280
- Section 1245, 303, 305
- Section 1250, 303, 305
- Internal Revenue Service (IRS), 33
- International Accounting Standards Board (IASB), 397
- International Financial Reporting Standards (IFRS), 397
- Intrinsic value of a firm, 397
- Inventory, 189
- Inventory turnover, 397–398
- Invested capital, 398
- Investment Adviser Registration Depository (IARD), 346
- Investment Advisers Acts of 1940, 345–346
- Investment banker, 79t
- Investment banks, 79, 398
- Investment horizon, 138
- Investment tax credit, 398
- Investment thesis/investment philosophy, 398
- Investment value, 37
- Investors:
- IOI, See Indication of interest
- IP (intellectual property), 69, 265
- IPO (initial public offering), 396
- IRR (internal rate of return), 397
- IRS, See Internal Revenue Service
- Issue, of securities, 351–354
- Issuers, 398
- Issuer's agent, 338
-
- Labor, in cross‐border M&A, 370–371
- Later stage, 398
- LBO (leveraged buyout), 237–242, 399
- LBO value, 39
- Lead investors, 399
- Leadership:
- Legal documentation, 309–322
- Legal due diligence, 264–266, 368
- Legal provisions, in LOIs, 119–120
- Legal structure, of deals, 222–224
- Lehman formula, XX
- Letter of intent (LOI), 114–116, 399
- Leverage, 233, 238, 399
- Leverage alliances, 383
- Leveraged buyouts (LBOs), 237–242, 399
- Leveraged recapitalization, 399
- Liabilities:
- LIBOR (London Interbank Offered Rate), 400
- Licensure, for M&A practice, 90–91, 103
- Lien, 266
- Limitations and disclosures, 86
- Limited auctions, 111
- Limited liability company (LLC), 381
- Limited liability partnership (LLP), 381
- Limited partner (LP), 289, 381
- Limited partnerships, 381–382
- Limits, on guarantees, 252
- Lines of credit, 399
- Liquidation, 399
- Liquidation analysis, 400
- Liquidation balance sheet, 400
- Liquidation preference, 400
- Liquidation value, 400
- Liquidity discount, 400
- Liquidity event, 400
- Litigation, 266
- LLC joint ventures, 228
- LLC, See Limited liability company
- LLP (limited liability partnership), 381
- Lockup agreement, 400
- LOIs, See Letters of intent (LOIs)
- London Interbank Offered Rate (LIBOR), 400
- Lower‐middle market, 136–137
- Lower‐middle market companies:
-
- M&A (mergers and acquisitions), 400. See also Acquisition(s); Mergers
- M&A advisors:
- M&A Broker No‐Action Letter (M&AB NAL), 91, 338–345
- M&A Brokers, 400
- M&A Practice Section (of ABA), 122
- M&A Source, 175
- MACRS (Modified Accelerated Cost Recovery System), 302–303
- Maintenance CapEx, 400
- M&AMFin (Merger & Acquisitions Master Finance), 175
- M&AMI (Merger & Acquisitions Master Intermediary), 175
- Management:
- Management buyout (MBO), 104, 401
- Management fees, 401
- Management presentation, 401
- Management rights, 401
- Manufacturing, 267
- Marginal costs, 401
- Mark‐to‐market distribution of assets, 291
- Market activity:
- Market capitalization, 401
- Market insight, 159–162
- Market rent adjustments, 183
- Market research, 161
- Market risks, 367
- Market timing, 51–52
- Market valuation, 195–211
- Martin Ice Cream v. Commissioner, 284, 305
- Material human capital, 40
- Materiality scrape, 400
- MBO (management buyout), 104, 401
- Memorandum of understanding (MOU), 401
- Merchant banking, 401
- Merger:
- with corporations, 296–300
- deal structure for, 224–228
- deal structure of, 316–317
- divisive D reorganizations, 303
- forward triangular (type A), 297
- reverse triangular (type A), 297, 298f
- statutory (type A), 297
- triangular (type A), 297
- Type A reorganizations, 306–307
- Type B reorganizations, 297, 298, 307
- Type C reorganizations, 298–299, 307
- Type D reorganizations, 299
- Type E reorganizations, 299
- Type F reorganizations, 299, 303
- Type G reorganizations, 299
- Merger & Acquisitions Master Finance (M&AMFin), 175
- Merger & Acquisitions Master Intermediary (M&AMI), 175
- Mezzanine, 401
- Mezzanine fund, 24, 249–250
- Mezzanine investor, 18
- Middle market, 3–10, 402
- Middle‐Market Professional (MMP) program, 175
- Middle‐middle market companies, 14, 16t
- Middle stage, 402
- Milestone fees, 87
- Miller, Merton, 231
- Minimum fee clauses, 88
- Mittelstand, 4
- MMP (Middle‐Market Professional) program, 175
- Modified Accelerated Cost Recovery System (MACRS), 302–303
- Modigliani, Franco, 231
- Monetary assets and liabilities, 402
- MOU (memorandum of understanding), 401
- Multiples, 402
- Muskat, Irwin v. Commissioner, 305
-
- Narrow‐based weighted average antidilution, 402
- NASAA, See North American Securities Administrators Association
- Nasdaq, 402
- National Center for the Middle Market (NCMM), 4, 5, 52, 66
- National defense matters, 333–334
- Natural language understanding (NLU), 163
- NBO (nonbinding offer), 403
- NCMM, See National Center for the Middle Market
- NDA, See Nondisclosure agreement
- Negative working capital, 187–188
- Negotiated sales:
- Negotiations:
- Net capital expenditure, 402
- Net investment income tax (NIIT), 304
- Net operating profit less adjusted taxes (NOPLAT), 402
- Net present value (NPV), 402
- Net recognized built‐in gains, 306
- Net working capital (NWC), 403
- Networking, 81
- NIIT (net investment income tax), 304
- NLU (natural language understanding), 163
- No‐shop, 403
- Non‐interest‐bearing debt, 73
- Non‐shop provisions, 313, 315t
- Nonbank lenders, 246
- Nonbinding offer (NBO), 403
- Nonbinding provisions, of LOI, 116
- Noncash charges, 201
- Noncompete, 403
- Noncompete allocations, 284, 304
- Noncompete covenants, 281
- Noncompetition provisions, 312
- Noncumulative dividends, 403
- Nondisclosure agreement (NDA), 403
-
- OFAC (Office of Foreign Assets Control), 333
- Offering memorandum, 102, 103, 404. See also marketing book
- Office of Foreign Assets Control (OFAC), 333
- OIDs (original issue discounts), 404
- One‐time events, 182
- One‐time expenses, 201
- Online platforms, 134
- Operating leases, 248
- Operating leverage, 60
- Operating losses, 404
- Operating profits, 73, 404
- Operational risks, 367
- Operational structure, 226–227
- Opportunity costs, 404
- Optics, 404
- Optimal capital structure, 231, 232
- Optimization, 55–73
- Options, 140
- Option pools, 404
- Organization, of companies, 8–10
- Organizational leadership, 268
- Original issue discount (OID), 404
- Origination fees, 404
- Orphans, 404
- Outbound M&A, 359
- Outstanding shares, 404
- Oversubscription, 404
- Owners:
-
- Par, 404
- Pari passu, 404
- Participating dividends, 405
- Participating preferred stock, 405
- Partnerships, 380–381
- Partnership allocations, 305
- Partnership buyers, 293
- Partnership doctrine, 290, 305
- Partnership gain tracking, 292–293, 305
- Partnership M&A transactions, 289–290
- Pay to play, 405
- Payables, 189–190, 405
- Payback, 405
- Payment in kind (PIK), 405
- Payroll items, 190
- PCOC (private cost of capital), 206–207
- PE firm, See Private equity firm
- Peg, 186–187
- PEG (private equity group), 405
- Private cost of capital (PCOC), 206–207
- Performance, of middle market, 4–5
- Personal assets, 192
- Personal goodwill, 284–285, 301, 305
- Personal guarantee (PG):
- PG, See Personal guarantee
- Piggyback rights, 405
- PIK (payment in kind), 405
- Pink sheets, 341, 405
- PIPE (private investment in public equities), 406
- Pipeline, 133–134
- Pitch deck, 102. See also marketing book
- Placement agent, 405
- Platform, 405
- Platform strategies, 139
- Point‐in‐time appraisals, 41
- Poison pills, 405
- POP (purchase order) financing, 406–407
- Portfolio company (portco), 153, 405
- Postmerger integration, 144–146
- Postsale integration, 124–125
- PPA (purchase price adjustment), 407
- PPM (private placement memorandum), 328, 406
- Practice management, 77–91
- PRE (private return expectation), 205–208
- Predictability, of revenues and earnings, 65
- Preference, 405
- Preferred stock, 406
- Preliminary discussions, with sellers, 94–97
- Present value, 209
- Pretax basis, 199–200
- Pretransaction consulting, 82
- Price changes, 123
- Private auction, 110t, 111–112
- Private business valuation, 31–43
- Private Capital Markets, 245
- Private companies, 192
- Private equity, 249–250, 406
- Private equity (PE) firm, 249
- Private equity group (PEG), 405. See also Private Equity firm
- Private financial reporting, 180t
- Private information, 406
- Private investment in public equities (PIPE), 406
- Private placement, 406
- Private placement exemptions, 326–329
- Private placement memorandum (PPM), 328, 406
- Private return expectation (PRE), 205–208
- Private securities, 406
- Privately‐held company, 341
- Pro rata, 406
- Professional standards, 169–176
- Professionalism, 173
- Prospective financial statements, 106
- Prospectus, 102, 103, 325, 406. See also marketing book
- Proxy statements, 356
- Prudent man rule, 406
- Psychosocial risk/return, 19–20
- Public auction, 110t, 112–113
- Public companies, 355–357
- Public financial reporting, 180t
- Public information, 406
- Purchase order (PO) financing, 406–407
- Purchase price, 214–215
- Purchase price adjustment (PPA), 407
- Purchase price allocation:
- Puts, 407
-
- Raiders, 407
- Range of value, 42–43
- Ratchet, 407
- Ratio analysis, 260–261
- Real estate, 287
- Real estate agents, 78
- Realization ratio, 407
- Recapitalization, 242–243, 300, 407
- Recapture, 276, 287
- Recast earnings adjustments, 200–202
- Recast EBITDA, 199–202, 203t, 204t
- Recasted financial statements, 193
- Receivables, 188–189, 192, 407
- Reconciliation:
- Recourse, 408
- Redeemable preferred, 408
- Redemption or call, 408
- Redemption rights, 408
- Registration, 337–338, 349, 408
- Registration rights, 408
- Regulation A, 353, 355
- Regulation and compliance, 323–357
- antitrust laws, 331–333
- bulk sales laws, 334–335
- FINRA provisions for broker‐dealers, 347–350
- Investment Advisers Acts of 1940, 345–346
- for issuing, selling, or exchanging securities for deal, 351–354
- and legal documentation, 322
- M&AB no‐action letters, 338–345
- professional standards and ethics codified in, 172
- for public companies, 355–357
- SEC provisions regulating broker‐dealers, 336–338
- Securities Act of 1933, 324–329
- Securities Exchange Act of 1934, 329–331
- state blue‐sky laws, 354–355
- transactions with foreign investors, foreign trade, and national defense matters, 333–334
- WARN Act, 335–336
- Regulation D (Reg D), 327, 408
- Regulation S (Reg S), 408
- Relationship capital, 40
- Relative value, 225
- Relevance, maintaining, 67
- Reorganizations:
- Reporting companies, 355–356
- Representations and warranties, 318–322, 408
- Representations and warranties insurance (RWI), 321, 409
- Reserve, 409
- Residual method, 280
- Resources, allocation of, 148
- Restricted securities, 326
- Restricted stock, 409
- Restructure, 409
- Retained assets, 223
- Retainers, 87
- Retirement, 104
- Return expectations:
- Return on assets (ROA), 409
- Return on equity (ROE), 409
- Return on invested capital (ROIC), 57–61, 72–73, 409
- Return on investment (ROI), 409
- Return on sales (ROS), 409
- Revenues:
- Revenue Procedure 2011‐29, 286
- Revenue recognition, 262
- Revenue Ruling 59‐60, 37
- Reverse compounded, 209
- Reverse splits, 409–410
- Reverse triangular mergers (type A), 297, 298f
- Revolving loans, 410
- Right of co‐sale with founders, 410
- Right of first refusal, 410
- Right to inspect provisions, 314t
- Rights offerings, 410
- Risk(s):
- allocation of, 124
- analysis of, in due diligence, 261
- in appraisals, 19
- awareness of, 63
- behavioral, 19–20
- buyers' views of, 20–26
- country, 365
- in due diligence, 261
- financial, 365–366
- of forfeiture, 288, 304
- insolvency, 396
- in legal due diligence, 266
- management's views of, 18–20
- market, 367
- mitigation of, in deal structure, 216
- operational, 367
- and owner value, 38–39
- owners' views of, 18–20
- in private capital markets, 17–26
- psychosocial, 19–20
- reducing, with optimization, 62–67
- related to currency, 365–366
- and return expectations, 15
- in valuation, 32
- Risk management, 62–67
- Risk tolerance, 42
- ROA (return on assets), 409
- Road show, 410
- ROE (return on equity), 409
- ROI (return on investment), 409
- ROIC, See Return on invested capital
- Rollover equity, 410
- Rollover ownership, 240n*
- Rollup strategies, 139, 410
- ROS (return on sales), 409
- Round, 410
- Rule 144, 326, 410
- Rule 145, 325
- Rule 147, 327
- Rule 419, 354
- Rule 504, 327–328, 353
- Rule 506, 328–329, 352, 353, 355
- RWI (representations and warranties insurance), 321, 409
-
- S corporation, 382
- S corporation basics, 306
- S corporation built‐in gains tax, 306
- Sales, 268–269
- Sales team, 133
- Salvage value, 410
- Sandbagging, 410
- Sarbanes–Oxley, 411
- Sarbanes–Oxley Act, 366
- SBA, See Small Business Administration
- SBIC, See Small business investment company
- Scalability, 60, 105, 411
- Scale‐up, 411
- Schedule 13E‐3, 357
- Schedule K‐1, 411
- Schedules, See Disclosure Schedules
- Scope of services, 85–86
- SCOR (Small Company Offering Registration), 328
- SCOR Form U7, 328
- Screens, 153–154
- Search fund, 24
- Seasonal working capital, 187
- SEC, See Sec urities and Exchange Commission
- Secondary market, 411
- Section 338 election, 295–296, 306
- Section 721 contribution/rollover, 220–221
- Section 1031 like‐kind exchange, 306
- Security(‐ies), 411
- Securities Act of 1933, 324–329
- Securities and Exchange Commission (SEC), 411
- creation of, 329
- and financial analysis, 179
- on finders, 344
- Form 8K, 356
- Form D, 327, 351–352
- Form S‐1, 351
- Form S‐4, 351
- on human capital measures, 40
- on investment companies and advisers, 346
- on issuing, selling, or exchanging securities, 351–354
- private placement exemptions, 327
- provisions regulating broker‐dealers, 336–338
- Regulation A, 353, 355
- Regulation D, 327
- Rule 144, 326, 410
- Rule 145, 325
- Rule 147, 327
- Rule 419, 354
- Rule 504, 327–328, 353
- Rule 506, 328–329, 352, 353, 355
- Schedule 13E‐3, 357
- short‐form S‐3, 351
- on SPACs, 25–26
- on special purpose acquisition companies, 353–354
- Securities Exchange Act of 1934, 329–331, 347
- Securities Industry Essentials (SIE) exam, 349
- Securities laws, 90–91, 323–324, 344–345
- Seed capital, 411
- Seed stage, 411
- Segmented markets, 12–17
- Self‐employment tax, 290–291
- Sell‐side representation, 93–125
- attorney's role in, 310
- buyer interest and transaction structure, 113–120
- closing process, 122–125
- data collection, 97–100
- definitive agreements, 121–122
- due diligence, 120–121
- industry research and buyer identification, 100–101
- marketing book, 101–106
- marketing process, 106–109
- negotiated sales, 109, 111f
- preliminary discussions with seller, 94–97
- private auctions, 111–112
- public auctions, 112–113
- in value optimization, 68–69
- Sellers:
- Selling securities, 351–354
- Seminars, offering, 81
- Senior debt, 412
- Seniority, 412
- Series 7 exam, 350
- Series 24 exam, 350
- Series 79 exam, 350
- Series 82 exam, 350
- Series A preferred stock, 412
- Services:
- Severance, 283
- Shareholders:
- Shell, 412
- Sherman Antitrust Act, 331
- Short‐form S‐3, 351
- SIC (Standard Industrial Classification), 412
- SIE (Securities Industry Essentials) exam, 349
- Small business:
- Small Business Administration (SBA), 3, 24, 246, 250, 412
- Small business investment companies (SBICs), 24, 246, 346, 412
- Small Business Mergers, Acquisitions, Sales and Brokerage Simplification Act, 343n*
- Small Company Offering Registration (SCOR), 328
- Society for Human Resources Management, 8–9
- Soft commitment letters, 154
- Software, 267
- Software‐as‐a‐service model, 60, 218
- Sole proprietorships (SPs), 382
- SoP (Statement of Policy), 328
- SPAC, See Special purpose acquisition company
- Speaking engagements, as marketing, 81
- Special profit allocations, 291–292
- Special purpose acquisition companies (SPACs), 25–26, 353–354, 412
- Special situation funds, 250
- Spinoffs, 299, 412
- Spinouts, 299, 412
- SPs (sole proprietorships), 382
- Stalking horses, 412
- Stand‐alone value, 139
- Standard Industrial Classification (SIC), 412
- State laws:
- State securities laws, 344–345
- Statement of Policy (SoP), 328
- Statutory mergers, 228
- Statutory mergers (type A), 297
- Stepped‐up basis, 220, 275
- Stock, 412
- Stock grants, 413
- Stock options, 413
- Stock Purchase Agreement (SPA), See Definitive Agreements
- Stock transaction:
- Strategic buyers (strategics), 21t, 25–26, 36, 127, 128, 137–139, 152, 256
- Strategic combination, 205
- Strategic due diligence, 142, 143f, 360, 372
- Strategic‐financial hybrid buyers, 128
- Strategic investor, 413
- Strategic planning process, 133
- Strategic position, 58–59
- Strategic rationale, for merger, 225, 228
- Structural capital, 40
- Structured overadvance, 413
- Subordinated debt, 413. See also Mezzanine fund
- Subscription‐based businesses, 218
- Success fees, 87, 88
- Succession, See Transition, succession, and exit planning
- Suppliers, 268
- Supplier concentration, 66
- Survival periods, 320–321, 413
- Sweat equity, 413
- Sweetener, 413
- Synergy(‐ies), 413
-
- Tag‐along right, 413
- Tail provision, in client engagement, 89
- Takedown, 413
- Takeover, 413
- Target, 413
- Tax considerations:
- Tax provisions, 271–307
- asset transactions, 275–285
- assets that qualify for installment treatment, 288–289
- for buyers, 285–287
- C corporations, 272–273
- corporate M&A issues, 293–302
- in deal offers, 117
- installment planning opportunity, 289
- installment sales, 287–288
- limited liability companies and partnerships, 274
- partnership gain tracking rules, 292–293
- partnership M&A transactions, 289–290
- partnerships vs. S corporations, 290–292
- purchase price allocation for partnership buyers, 293
- risk of forfeiture, 288
- S corporations, 273
- stock transactions, 277–279
- and value optimization, 70
- Team approach:
- Theoretical ideal mix, 231
- Third‐party challenges, 123–124
- 33 Act, See Securities Act of 1933
- 34 Act, See Securities Exchange Act of 1934
- Timing bonus, 89
- Total assets, 73
- Total value amount (TVA), 88
- Traditional due diligence, 141–142, 257–270
- analysis of other risks, 261
- audited financial statements, 261–262
- balance sheet analysis, 260
- business due diligence, 267–270
- compensation and benefits, 263–264
- financial matters, 258
- GAAP compliance, 262
- legal due diligence, 264–266
- quality of earnings analysis, 258–260
- ratio analysis, 260–261
- tax structuring and compliance, 262–263
- technical due diligence, 266–267
- Tranche, 414
- Transactions:
- Transfer of ownership, 67–71
- Transfer pricing, 366
- Transition, 414. See also Transition, succession, and exit planning
- Transition, succession, and exit planning, 47–54
- Treasury Regulations, 302–306
- Treasury stock, 414
- Triangular merger (type A), 297
- True‐up, 187
- Trust, building with clients, 98
- Turnaround funds, 250, 414
- TVA (total value amount), 88
- Type A forward triangular merger, 297
- Type A reorganizations, 306–307
- Type A reverse triangular merger, 297, 298f
- Type A statutory merger, 297
- Type A triangular merger, 297
- Type B reorganization, 297, 298, 307
- Type C reorganization, 298–299, 307
- Type D reorganization, 299
- Type E reorganization, 299
- Type F reorganization, 299, 303
- Type G reorganization, 299
-
- Valuation:
- Valuation services, 82
- Value:
- Value investors, 21t, 26
- Value kicker, 88
- Value proposition, 225
- Value subworlds, 195–197, 198t
- Value variability, 42
- Value worlds, 41–43
- VDRs, See Virtual data rooms
- Vendors, 268
- Venture capital, 250, 414
- Venture capital method, 415
- Venture capitalists, 133
- Vintage, 415
- Virtual data room (VDR), 158–159
- Voting rights, 415
-
- WACC, See Weighted average cost of capital
- Walk‐away point, 415
- WARN Act (Worker Adjustment and Retraining Notification Act), 335–336
- Warrants, 415
- Washout round, 415
- Webinars, offering, 81
- Weighted average antidilution, 415
- Weighted average cost of capital (WACC), 206–207, 232f, 415
- White space, 415
- William Norwalk v. Commissioner, 305
- Williams Act, 330–331
- Wipeout bridge, 415–416
- Worker Adjustment and Retraining Notification Act (WARN Act), 335–336
- Working capital:
-
- Yield, 416
-
- Zombie, 416
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