Glossary.

Add-on (bolt-on)

A smaller acquisition made by a company that a private-equity fund already owns, to be combined with it. In the European mid-market the add-on buyer is often the highest credible bidder, and the one founders least expect.

Adjusted EBITDA

Earnings before interest, tax, depreciation and amortisation, after “normalisations”: owner costs restated to market, one-offs removed, run-rate items annualised. The number a multiple is applied to – and the first thing a buyer’s advisers rebuild.

Anchoring

The tendency of any estimate to be biased toward the first number named. The reason a buyer’s opening offer is dangerous, and a defensible valuation of your own is the antidote.

ARR / MRR

Annual or monthly recurring revenue: the annualised value of active subscriptions. The base for software revenue multiples; its growth and its retention are the first things a buyer prices.

Asset deal

A sale of named assets and liabilities rather than of the company’s shares. How contracts and employees move depends on the jurisdiction and the mechanics – in Switzerland and much of Europe, contracts are generally assigned one by one and employees attached to the business transfer under statutory rules; US practice differs – and the proceeds land in the company. Compare share deal.

Auction

A sale process in which several buyers bid against a timetable. Distinguish a controlled auction (a small, qualified field) from a broad auction (a wide broadcast); competition is a state buyers believe in, not a count of names.

Basket (deductible / tipping)

A threshold that aggregate warranty claims must exceed before the buyer recovers anything. A deductible basket pays only the excess; a tipping basket pays from the first euro once crossed. Whether it deducts or tips matters as much as its size.

Bilateral deal

A sale negotiated with one buyer, without a competitive process. Still the majority of private-company sales in the one recent sample we have.

Blind profile

The anonymised one- or two-page description of a company circulated to prospective buyers before any confidentiality agreement is signed – also called a teaser. Written so the company cannot be identified from it; the discipline is described on the confidentiality page.

Break fee / reverse break fee

A payment owed if a party walks away in defined circumstances. Rare in mid-market private deals; more common where a buyer needs financing or regulatory approval.

Bring-down (of warranties)

The repetition of the warranties at closing, as if given on that day. Between signing and closing, anything that has changed must be disclosed – and may give the buyer a right not to close.

CAC payback

Months of gross margin needed to recover the cost of acquiring a customer. One of the unit-economics figures a software buyer asks for early.

Cap (liability cap)

The maximum a seller can be made to pay for warranty claims, expressed as a share of the price. Ranges widely by market and by whether warranty insurance is in place; negotiated together with the basket and the survival period.

Cash-free, debt-free

The pricing convention under which the enterprise value assumes the seller keeps the cash and settles the debt; the equity price is the enterprise value plus cash minus debt and debt-like items.

Change-of-control clause

A contract term giving a customer, supplier, lender or landlord rights – consent, termination, repricing – when the company’s ownership changes. Found by legal diligence; the material ones become pre-closing consents or conditions to closing.

CIM (information memorandum)

The confidential information memorandum: the document that presents the company, its market, its numbers and its plan to qualified buyers after they sign an NDA. Written to survive a buyer’s committee, not to impress a reader.

Clean team

A small, ring-fenced group – often external advisers – allowed to see a competitor-bidder’s most sensitive information (customer names, pricing) so the deal can be evaluated without handing the competitor the data if it walks away.

Closing (completion)

The day the shares transfer and the funds flow. May coincide with signing or follow it by weeks or months while conditions are satisfied.

Completion accounts

A price mechanism under which a preliminary price is paid at closing and adjusted afterwards from accounts drawn up at the closing date. Compare locked box.

Conditions precedent (CPs)

Events that must occur before a signed agreement is completed: regulatory clearances, third-party consents, financing, sometimes employee consultation. Each is a right not to close for the party it protects – usually the buyer.

Confirmatory due diligence

The buyer’s detailed verification of the company after a letter of intent and under exclusivity, by financial, tax, legal, commercial, technical, people and operations specialists.

Control premium

The amount by which the price for a controlling stake exceeds the value of the same shares traded in small lots. Historically 20–30% for listed targets; not a rule of thumb.

Covenants

Promises about conduct: the seller’s to run the business normally between signing and closing and not to compete afterwards; the buyer’s to pursue the conditions and, sometimes, to run an earn-out fairly.

Critical talent

The people on whom the buyer’s thesis depends – defined by what they hold (architecture, relationships, knowledge), not by title. Identified, and protected, before closing.

Data room (VDR)

The secure online repository through which documents are disclosed to buyers in stages. Built before launch; its completeness is one of the strongest predictors of a process that does not stall.

Day 1

The first day under new ownership. Its job is continuity: everyone knows what happened, who they report to, what changes and what does not. The integration plan is written so that Day 1 is boring.

DCF (discounted cash flow)

A valuation method that forecasts the company’s future cash flows and discounts them to today at a rate reflecting their risk, plus a terminal value for the years beyond the forecast – which commonly makes up the majority of the result.

De minimis

The size below which an individual warranty claim is disregarded entirely. Works with the basket to set the floor of what a buyer can claim at all.

Debt-like items

Liabilities treated as debt in the price bridge though they are not loans: accrued bonuses, transaction costs, overdue tax, pension deficits, and – contested in software – deferred revenue.

Decision rights

Who may decide what after closing – pricing, hiring, roadmap, spending, brand. The table that gives “you remain CEO” its meaning.

Deferred consideration

Part of the price paid later as a fixed amount, not contingent on performance. Effectively a loan from seller to buyer; ask about security and ranking.

Deferred revenue

Cash collected for services not yet delivered. Buyers argue it is debt-like (they must deliver at their cost); sellers argue it is working capital; the usual settlement splits it.

Dis-synergy

Value destroyed by combining two businesses: customers lost to the disruption, people who leave, products cannibalised, attention diverted. Rarely in the buyer’s model; often in the outcome.

Disclosure letter

The seller’s schedule of matters that qualify the warranties. What is fairly disclosed cannot be claimed against; one of the most valuable documents a seller writes after the memorandum.

Drag-along / tag-along

Shareholders’-agreement rights: drag-along forces minorities to sell when the majority sells; tag-along lets minorities join a sale on the same terms. Decisive for co-founders and for rollover equity.

Earn-out

Additional price payable only if the business meets defined targets after closing, measured over a period in which the buyer runs the business. Its value depends on the definition, the levers and the buyer’s conduct, not on your forecast.

Enterprise value (EV)

The value of the operating business to all its capital providers, before deducting debt and adding cash. What multiples produce; not what shareholders receive.

Equity value

What shareholders receive: enterprise value plus cash, minus debt and debt-like items, adjusted for working capital – then divided by the waterfall.

Escrow / holdback

Part of the price retained – by a third-party agent (escrow) or by the buyer (holdback) – against warranty claims, released on a timetable. Its size and release date are negotiated with the warranty package, and warranty insurance shrinks it sharply.

Exclusivity (no-shop)

The seller’s binding undertaking in a letter of intent not to negotiate with anyone else for a period. The moment leverage changes hands; typically four to twelve weeks.

FDI screening

Government review of acquisitions by foreign investors in sensitive sectors. Switzerland’s regime, adopted in 2025 and expected in force from 2027, covers state-controlled investors only; the EU’s revised regulation applies from 2028 at the earliest.

Financial buyer

A fund or investor buying for a financial return on a plan – a private-equity platform, a growth investor, a family office, a search fund. Compare strategic buyer.

Football field

The chart that shows the valuation range produced by each method side by side, so the methods check one another and the overlap becomes the defensible range.

Fundamental warranties

Warranties on title to the shares, capacity and authority. Usually carry a higher cap and a longer survival period than general warranties, and sit outside warranty insurance retentions in some deals.

Good leaver / bad leaver

Terms in management-equity documents deciding what a departing holder receives for their shares. A good leaver (death, disability, dismissal without cause, sometimes resignation after a set date) typically receives fair value; a bad leaver (dismissal for cause, early resignation, breach of restrictive covenants) typically receives the lower of cost and fair value. The definitions are negotiated, and they matter more than the headline percentage.

Gross retention / net revenue retention

Gross retention: the share of last year’s recurring revenue kept from the same customers before expansion. Net revenue retention: the same after upsell; above 100% means existing customers grow. Among the strongest predictors of a software multiple.

Indemnity (specific indemnity)

Euro-for-euro compensation for a specific, identified risk, regardless of disclosure or knowledge – typically tax exposures or known disputes found in diligence.

Indicative offer (IOI / NBO)

A non-binding first-round letter stating price or range, structure, financing, timing and assumptions. The assumptions are the informative part.

Integration management office (IMO)

The team that coordinates the integration workstreams – people, technology, product, commercial, finance, legal – under an executive sponsor who owns the outcome. Ask who runs it and what they are measured on.

Integration thesis

The buyer’s answer to two questions: why are we buying this company, and what has to change for that to work? It exists before the letter of intent; the founder should ask for it before choosing the buyer.

IRR / MOIC

Internal rate of return (annualised) and multiple of invested capital – the two measures a private-equity fund is judged by. Surveyed funds target a median 25% and 2.5×; with the debt available and the exit assumed, those targets set the ceiling on what a fund can pay.

LBO (leveraged buyout)

An acquisition financed partly with debt secured on the target’s own cash flows. The analysis of one – given debt, exit and return targets – gives a financial buyer’s ceiling under those assumptions.

Leakage / permitted leakage

Under a locked box, value leaving the company to the seller after the locked-box date – dividends, fees, unusual payments. Prohibited except as agreed (“permitted leakage”) and repaid euro for euro if found.

Letter of intent (LOI) / term sheet

The chosen buyer’s terms in outline plus the rules for reaching a signed agreement. Usually non-binding on price and structure; binding only on the provisions expressed to be so, typically exclusivity and confidentiality, sometimes costs.

Liquidation preference

An investor’s right to be paid a defined amount before ordinary shareholders on a sale. Decides how a headline price is divided; modelled in the waterfall.

Lock-up

A period after closing during which shares received as consideration may not be sold. For a founder paid in a listed acquirer’s stock, the lock-up decides when the paper becomes cash – and at what price.

Locked box

A price mechanism under which the price is fixed on a historical balance sheet and the buyer takes economic ownership from that date, protected by a no-leakage covenant. The more common mechanism in Swiss private deals; European surveys disagree on the split.

Long-stop date

The date by which conditions must be satisfied, failing which either party may terminate the signed agreement.

MAC / MAE clause

Material adverse change: a buyer’s right to walk away if something defined and serious happens before closing. Common in American practice, uncommon in European.

Management presentation

The founder’s and team’s formal presentation to shortlisted buyers in the second round. One of the few moments only the owner can lead.

Materiality scrape

A sale-agreement provision that ignores “material” qualifiers in the warranties when calculating a claim, so that small breaches count. Buyer-friendly; often traded against the basket.

Merger control

Competition-law review of acquisitions above turnover or share thresholds. Whether a filing is needed depends on the buyer’s turnover as much as the target’s – in some jurisdictions the thresholds are low enough that a large buyer and a small target can meet them – so it is checked per bidder.

NDA (non-disclosure agreement)

The buyer’s binding promise of confidentiality and limited use – and, where negotiated, non-solicitation of staff and customers – before it learns the company’s name. Commonly one to three years.

Net debt

Debt minus cash, as defined in the sale agreement. The definition, including debt-like items, is negotiated with the price and often worth more than a turn of the multiple.

Non-compete

The seller’s covenant not to compete with the business sold, for a period and within a territory and scope. In a share sale it is a commercial term judged on reasonableness; a separate non-compete in your employment contract is limited by employment law – under Swiss law (Art. 340a CO) to what is necessary, and normally to three years at most.

Non-reliance clause

A term in the sale agreement in which the buyer confirms it has not relied on any statement outside the agreement – the information memorandum, management presentations, data-room answers – and so, fraud apart, cannot sue on them. It is why the warranties, not the marketing, carry the legal weight.

Normalisation (add-backs)

The adjustments that turn reported earnings into the sustainable earnings a buyer will pay for: owner costs, one-offs, run-rate items, capitalised development.

Precedent transactions

A valuation method using multiples paid in completed acquisitions of comparable companies. Includes control premiums; ages quickly; the disclosed deals are a biased subset.

Process letter

The seller’s written rules for a competitive process: timetable, what an offer must contain, how questions are asked. A vague one produces incomparable offers.

QoE (quality of earnings)

A transaction-focused analysis of how sustainable, predictable and cash-backed a company’s earnings are. Commissioned by buyers even where accounts are audited; run first by well-prepared sellers.

Retention pool

Money set aside to keep key employees through and after a sale. When funded from the purchase price, a price reduction under another name.

Rollover

Reinvestment of part of the seller’s proceeds into the buyer or the acquisition vehicle. Its worth depends on the class of equity, its place in the preference stack, governance and who decides the next exit.

Rule of 40

The heuristic that a software company’s revenue growth rate plus its profit margin should exceed forty. Coined in 2015; a shorthand, not a finding.

Run-rate

An annualised figure for something that started mid-period – a contract signed in month nine counted at twelve months of revenue. Legitimate when the contract is real; contested when the pipeline is.

Share deal

A sale of the company’s shares, with every contract, employee and liability inside it. The normal form for a technology company; the buyer’s protection against the unknown is the warranty package. Compare asset deal.

Signing

Execution of the sale agreement. May be simultaneous with closing or separated from it by the conditions.

SPA / APA

Share purchase agreement or asset purchase agreement: the definitive contract of sale. Where a headline becomes a number.

Standalone (ring-fenced) business

An acquired company kept as a separate unit with its own books after closing. The condition under which an earn-out is most measurable – and the one integration tends to erode.

Standstill

A buyer’s undertaking, usually in an NDA involving a listed company, not to acquire shares or make an approach outside the agreed process for a period.

Strategic buyer

An operating company buying product, customers, capability or time, and paying for what the target is worth to it. Compare financial buyer.

Synergies

The value a buyer expects from combining the businesses: cost synergies (removed duplication) and revenue synergies (cross-selling, pricing, reach). Committees tend to trust the first and doubt the second.

Teaser

A one- or two-page anonymised summary sent to potential buyers before an NDA: enough to test interest, not enough to identify the company.

Terminal value

In a DCF, the value of all cash flows beyond the explicit forecast, usually the majority of the total. Often the most consequential number in the model – and itself the product of growth, margin and discount-rate assumptions.

Ticker

A daily, interest-like amount added to a locked-box price for the period between the locked-box date and closing, compensating the seller for value accruing in the business while the buyer has not yet paid. Also called value accrual.

Trading comparables

A valuation method applying the multiples of listed peer companies to the target’s figures. Current and widely used; private companies have historically traded at a discount to it.

Transitional services agreement (TSA)

A post-closing contract under which one side provides services to the other for a period – systems, staff, premises – while the businesses separate or combine.

Value realisation

The point at which the reasons for doing the transaction become real – the synergies, the retained people, the migrated technology – as opposed to the point at which the integration checklist reaches 100%.

Vendor due diligence (VDD)

A seller-commissioned independent report on its own company, given to bidders before they conduct their own diligence. Common in larger European auctions.

Vendor loan note

A form of deferred consideration: the seller lends part of the price to the buyer, documented as a note. Often unsecured and subordinated to the buyer’s banks.

WACC

Weighted average cost of capital: the discount rate in a DCF, blending the cost of equity and the after-tax cost of debt.

Warranty

A seller’s contractual statement that a fact about the company is true. Untrue warranties give rise to claims, within the limitations negotiated.

Waterfall

The order in which a sale price is divided among share classes under liquidation preferences, participation rights and option acceleration. The founder’s proceeds are what remains.

W&I insurance (R&W insurance)

A policy that pays warranty claims in place of the seller, for a premium of roughly 1% of the insured amount and a retention of a fraction of a percent of enterprise value. Take-up rises steeply with deal size.

Working-capital peg

The agreed normal level of working capital the business must hold at closing; under completion accounts a shortfall reduces the price and an excess may increase it, subject to any collar. Set carelessly, a price adjustment the buyer collects after signing.

Market figures in the definitions are summarised from the chapters, where each carries its source and its limits. Definitions describe common practice in European and US private M&A; the terms of any specific agreement govern.

Published 2 September 2026 · Revised when a cited source updates, and at least annually · Sources are in the chapters, where each figure carries its limits.