M&A Glossary

81 terms you will meet when a company is bought or sold, defined in plain English.

A

Acquisitionalso: Takeover, Buyout: One company or investor buying control of another business, either by buying its shares or by buying its assets. The buyer becomes the new owner and the seller is paid for what it gives up. In our experience, most deals involving private companies are acquisitions rather than true mergers.; Read the full guide See: Merger See: Share sale See: Asset sale
Add-backsalso: Adjustments, Normalisation adjustments: Expenses added back to profit when working out normalised EBITDA, because they will not continue after the sale. Examples are a one-off legal bill or a family member's salary for work that is not needed. Well-supported add-backs raise value; weak ones damage the seller's credibility.; Read the full guide See: Normalised EBITDA See: Quality of earnings
Asset salealso: Business transfer, Asset purchase: A sale in which the buyer picks the specific assets and liabilities it wants, such as equipment, stock, contracts and brand, and the seller's company keeps everything else. It lets the buyer leave unwanted liabilities behind. Where an undertaking is transferred, section 18A of the Singapore Employment Act moves the employment contracts to the buyer automatically. Contracts and licences with third parties may need their consent or a novation (a replacement contract) to move.; Read the full guide See: Share sale See: Transfer of a going concern
Auction processalso: Competitive process, Controlled auction: A sale run by inviting several buyers to bid in stages, usually to a timetable set by the seller's adviser. Competition between bidders tends to improve price and terms, and gives the seller a fallback if one buyer drops out. It takes more preparation and discipline than talking to one buyer.; Read the full guide See: Bilateral negotiation See: Process letter See: Indicative offer

B

Bilateral negotiationalso: One-on-one sale, Proprietary deal: A sale negotiated with one buyer only, rather than with several competing bidders. It can be quicker and more private, and suits cases where one buyer is a clear fit. The trade-off is less price tension, so the seller has less leverage when terms are disputed.; Read the full guide See: Auction process See: Exclusivity
Business broker: An intermediary who lists businesses for sale and matches them with buyers, usually for smaller companies. Brokers often work on volume and may market a business widely. An M&A adviser typically runs a more tailored, confidential process with targeted buyers.; Read the full guide See: M&A adviser See: Teaser
Buy-side: The buyer's side of a deal: the company or investor making the purchase and the advisers working for it. Buy-side advisers help find targets, value them, run due diligence and negotiate. Knowing who sits on the buy-side helps a seller understand what the other party is trying to protect.; Read the full guide See: Sell-side See: Strategic buyer See: Financial buyer

C

Capital gains taxalso: CGT: A tax on the profit from selling an asset for more than it cost. IRAS states that capital gains are not taxable in Singapore, but gains of an income or trading nature can be. Whether a gain is capital or income depends on the facts. Separately, under section 10L of the Income Tax Act, foreign-sourced gains from disposing of foreign assets can be taxable in some cases. Sellers should take tax advice.; See: Share sale See: Earn-out
Cash-free debt-freealso: CFDF: A common basis for pricing in which the buyer pays for the business as if it had no cash and no debt. The seller then keeps the surplus cash and pays off the debt, or the price is adjusted to match. It is how a headline enterprise value becomes the equity value the seller actually receives.; Read the full guide See: Enterprise value See: Equity value See: Net debt
Comparable transactionsalso: Precedent transactions, Transaction comps: A valuation method that looks at prices paid for similar businesses in past deals, usually expressed as multiples. It shows what buyers have actually been willing to pay. Good comparables are hard to find for private companies, because many deal prices are never published.; Read the full guide See: Multiple See: EV/EBITDA See: Discounted cash flow
Completionalso: Closing: The point at which ownership actually transfers and the buyer pays the money due on that day. It can happen at signing or weeks later, once any conditions are satisfied. In the United States it is usually called closing.; Read the full guide See: Signing See: Conditions precedent See: Long-stop date
Completion accountsalso: Closing accounts: A pricing method in which accounts are drawn up as at the completion date and the price is adjusted afterwards for the actual cash, debt and working capital. It reflects the true position on the day of transfer. It can also lead to disputes over how those accounts are prepared.; Read the full guide See: Locked box See: Working capital adjustment See: Net debt
Conditions precedentalso: CPs, Closing conditions: Things that must happen between signing and completion before the deal can close, such as regulatory or shareholder approvals or third-party consents. If they are not met by the agreed date, either party may be able to walk away. Sellers should keep the list short and within their control where possible.; Read the full guide See: Signing See: Completion See: Long-stop date
Considerationalso: Purchase price: The total that the buyer gives the seller in return for the business. It can be cash, shares in the buyer, a loan note, or a mix, and can be paid at completion or later. Sellers should look at how much is paid on day one and how much depends on future events.; Read the full guide See: Deferred consideration See: Earn-out See: Rollover equity
Customer concentration: When a large share of a company's revenue comes from a small number of customers. Buyers see it as a risk because losing one customer could hurt profits sharply. It can lower the price or lead to an earn-out tied to keeping those customers.; Read the full guide See: Key person risk See: Earn-out See: Due diligence

D

Data roomalso: Virtual data room, VDR: A secure online folder where the seller places documents for buyers to review during due diligence. Access is controlled and tracked, so the seller can see who viewed what. A well-organised data room speeds up the deal and signals a well-run business.; Read the full guide See: Due diligence See: Disclosure letter
Deferred considerationalso: Deferred payment: Part of the price that is fixed but paid later, for example in instalments over one or more years after completion. Unlike an earn-out, the amount does not depend on performance. The seller is effectively lending to the buyer, so security and the buyer's ability to pay matter.; Read the full guide See: Earn-out See: Vendor financing See: Consideration
Disclosure letteralso: Disclosure schedule: A letter from the seller to the buyer listing exceptions to the warranties in the sale and purchase agreement. Anything fairly disclosed generally cannot later be the basis of a warranty claim. Thorough disclosure is one of the seller's main protections.; Read the full guide See: Representations and warranties See: Sale and purchase agreement See: Data room
Discounted cash flowalso: DCF: A valuation method that forecasts the cash a business will generate in future and converts it into a value today, because money received later is worth less than money now. It focuses on the business's own prospects rather than market prices. The answer is very sensitive to the forecasts and the discount rate chosen.; Read the full guide See: Comparable transactions See: Net asset value See: Enterprise value
Due diligencealso: DD: The buyer's detailed investigation of the business before committing to buy it. It typically covers finances, contracts, legal matters, tax, employees and operations, and checks that what the seller has said is true. In our experience, problems found here are a leading reason prices fall or deals collapse, so preparing early pays off.; Read the full guide See: Financial due diligence See: Legal due diligence See: Data room See: Retrade

E

Earn-outalso: Earnout, Contingent consideration: Part of the price that is paid later only if the business hits agreed targets after the sale, such as revenue or profit. It bridges a gap between what the seller thinks the business is worth and what the buyer will pay today. Because the seller no longer controls the business, the definitions and protections in the agreement decide whether the money is ever paid.; Read the full guide See: Deferred consideration See: Consideration See: Integration
EBITDA: Earnings before interest, tax, depreciation and amortisation: a measure of operating profit before financing costs, tax and non-cash charges. It is widely used because it lets buyers compare businesses with different funding and accounting choices. It is not the same as cash, because it ignores spending on equipment and changes in working capital.; Read the full guide See: Normalised EBITDA See: EV/EBITDA See: Multiple
Enterprise valuealso: EV: The value of the whole business, regardless of how it is funded by debt or shareholders' money. Buyers usually quote offers on this basis. To get to what the shareholders actually receive, net debt and other adjustments are subtracted.; Read the full guide See: Equity value See: Net debt See: EV/EBITDA
Equity valuealso: Purchase price for the shares: The value of the shares, which is what the shareholders receive. Broadly, it is the enterprise value minus net debt, after any working capital and other adjustments. Two offers with the same headline enterprise value can produce very different equity values.; Read the full guide See: Enterprise value See: Net debt See: Cash-free debt-free
Escrowalso: Escrow account: Money from the price held by an independent third party for a set period after completion, to cover possible claims by the buyer. If no valid claims arise, it is released to the seller. The amount and length of the escrow are negotiated.; Read the full guide See: Holdback See: Indemnity See: Representations and warranties
EV/EBITDAalso: EBITDA multiple: Enterprise value divided by EBITDA: in our experience, the most common multiple used to value private companies. It lets buyers compare prices paid for businesses of different sizes. The multiple applied depends on the business's growth, risk and how many buyers want it.; Read the full guide See: Multiple See: Enterprise value See: EBITDA
Exclusivityalso: No-shop: A period during which the seller agrees not to negotiate with any other buyer. Buyers ask for it before spending heavily on due diligence and lawyers. Once granted, the seller loses competitive pressure, so the price and key terms should be as settled as possible before agreeing to it.; Read the full guide See: Letter of intent See: Retrade See: Bilateral negotiation

F

Family office: A private organisation that manages the wealth of one wealthy family, or a small group of families. Some buy stakes in private companies and can be patient owners without a fixed date to sell. Their investment style and decision-making vary widely from one office to the next.; Read the full guide See: Financial buyer See: Minority stake
Financial buyeralso: Financial sponsor, Sponsor: An investor that buys a business mainly to earn a return on its money, rather than to combine it with an existing operation. Private equity funds are the most common example. They usually want management to stay, and plan to sell the business again after some years.; Read the full guide See: Strategic buyer See: Private equity See: Rollover equity
Financial due diligencealso: FDD: The part of due diligence that tests the numbers: revenue, profit, cash, debt, working capital and how the accounts were prepared. Accountants working for the buyer usually carry it out. Its findings feed directly into the price, so clean and well-explained accounts matter.; Read the full guide See: Due diligence See: Quality of earnings See: Normalised EBITDA

H

Holdbackalso: Retention: Part of the price that the buyer keeps back for a period after completion, as security against claims or adjustments. Unlike an escrow, the money stays with the buyer. Sellers should agree clear rules for when it must be released.; Read the full guide See: Escrow See: Working capital adjustment

I

Indemnityalso: Specific indemnity: A promise by the seller to repay the buyer for a specific, identified loss, such as a known tax issue or pending lawsuit, if it arises. Unlike a warranty claim, the buyer usually does not need to prove the price was affected. Specific indemnities are normally reserved for known risks; a tax covenant or tax indemnity, by contrast, is usually general, covering pre-completion tax whether known or not.; Read the full guide See: Representations and warranties See: Escrow See: Warranty and indemnity insurance
Indicative offeralso: Indication of interest, IOI, Non-binding offer: A first, non-binding offer from a buyer, usually a price range plus key assumptions and conditions. The seller uses indicative offers to shortlist buyers for the next stage. Assumptions hidden in the small print often matter as much as the headline number.; Read the full guide See: Letter of intent See: Process letter See: Auction process
Information memorandumalso: IM, Confidential information memorandum, CIM: A detailed document describing the business for sale: history, products, customers, team, financial performance and prospects. It is sent to buyers who have signed a non-disclosure agreement. Buyers use it to decide whether to make an indicative offer.; Read the full guide See: Teaser See: Indicative offer See: Process letter
Integrationalso: Post-merger integration, PMI: The work after completion of combining the acquired business with the buyer's own: systems, people, customers, suppliers and reporting. Many of the benefits a buyer expects depend on it. A seller who stays on, or whose payment depends on later performance, will care a great deal about how integration is run.; Read the full guide See: Synergies See: Transition services agreement See: Earn-out

K

Key person riskalso: Founder dependence, Key man risk: The risk that the business depends heavily on one person, often the founder, for customers, know-how or decisions. Buyers worry that value leaves when that person does. Building a capable second line of management before a sale reduces it.; Read the full guide See: Customer concentration See: Earn-out See: Non-compete

L

Legal due diligencealso: LDD: The part of due diligence that reviews contracts, company records, licences, property, employment terms, disputes and intellectual property. Lawyers working for the buyer look for anything that could create liability or block the deal. Missing signatures or out-of-date registers are common, and easier to fix before a buyer finds them.; Read the full guide See: Due diligence See: Disclosure letter See: Representations and warranties
Letter of intentalso: LOI, Memorandum of understanding, MOU, Heads of terms: A document setting out the main agreed terms of a deal, such as price, structure and timetable, before full legal documents are drafted. Most of it is usually not binding, except points such as exclusivity and confidentiality. It is the seller's best chance to lock in key terms while competition still exists.; Read the full guide See: Term sheet See: Exclusivity See: Indicative offer
Leveraged buyoutalso: LBO: An acquisition funded largely with borrowed money, which is repaid from the acquired company's own cash flow. Private equity funds use it to increase their returns. For a seller, the buyer's financing becomes a condition to watch: if the lender hesitates, the deal can stall.; Read the full guide See: Private equity See: Management buyout See: Net debt
Locked boxalso: Locked-box mechanism: A pricing method in which the price is fixed using a balance sheet at an agreed date before signing, and no adjustment is made at completion. The seller promises that no value leaks out of the company to the seller after that date. It gives the seller price certainty and avoids a post-completion argument over the accounts.; Read the full guide See: Completion accounts See: Working capital adjustment See: Equity value
Long-stop datealso: Longstop date, Outside date: The final date by which conditions precedent must be met for the deal to complete. If it passes without completion, the parties can usually end the agreement. It stops a deal from hanging in limbo indefinitely.; Read the full guide See: Conditions precedent See: Completion

M

M&A adviseralso: Corporate finance adviser, Investment banker: A firm or person who guides an owner through buying or selling a business: preparing materials, finding and approaching buyers, running the process and negotiating terms. Sell-side advisers are usually paid partly through a fee on completion. Choosing one is a judgement about sector knowledge, buyer access and how closely they will work the deal.; Read the full guide See: Business broker See: Sell-side See: Success fee
Majority recapitalisationalso: Majority recap: A deal in which an investor buys a majority of the company while the founder keeps a meaningful minority stake. The founder takes cash off the table now and shares in any future increase in value. The founder also gives up control, so the shareholder agreement terms matter.; Read the full guide See: Minority stake See: Rollover equity See: Private equity
Management buy-inalso: MBI: A deal in which an outside management team buys the business and takes over running it. It suits owners with no internal successor. The incoming team has less knowledge of the business, so due diligence and handover matter more.; Read the full guide See: Management buyout See: Search fund See: Transition services agreement
Management buyoutalso: MBO: A deal in which the existing management team buys the business, usually with backing from a private equity fund, a lender or the seller. It offers continuity because the buyers already know the business. Management rarely has enough cash, so part of the price is often borrowed or deferred.; Read the full guide See: Management buy-in See: Leveraged buyout See: Vendor financing
Material adverse changealso: MAC, Material adverse effect, MAE: A clause that may let the buyer walk away, or renegotiate, if something seriously damages the business between signing and completion. What counts as material is heavily negotiated and often hard to prove. Sellers try to define it narrowly.; Read the full guide See: Conditions precedent See: Signing See: Retrade
Merger: Two businesses combining into one, with the owners of both ending up as owners of the combined group. In practice the word is often used loosely for any deal, even when one side is clearly buying the other. For a seller, the key question is the same: what you receive, and how much control you keep.; Read the full guide See: Acquisition See: Consideration
Mergers and acquisitionsalso: M&A: The umbrella term for buying, selling and combining companies or parts of companies. For a founder, it usually means selling some or all of the business to a new owner. The phrase covers everything from a small family firm changing hands to a large listed company takeover.; Read the full guide See: Acquisition See: Merger See: Sell-side
Minority stakealso: Minority interest: An ownership share of less than half of a company, so the holder does not control it alone. Founders sometimes sell a minority stake to raise cash or bring in a partner without giving up control. Minority holders rely on the shareholder agreement for their rights.; Read the full guide See: Majority recapitalisation See: Family office
Multiplealso: Valuation multiple: A shorthand for valuing a business as a number of times a financial measure, most often profit. A business valued at five times its profit has a multiple of five (illustrative). The multiple reflects growth, risk, size and how much buyers want that kind of business.; Read the full guide See: EV/EBITDA See: Comparable transactions See: Enterprise value

N

Net asset valuealso: NAV, Book value: The value of a company's assets minus its liabilities, as shown in its balance sheet. It is most useful for asset-heavy businesses or holding companies. For a profitable trading business, buyers usually pay more than net asset value because they are paying for future profits.; Read the full guide See: Discounted cash flow See: Stamp duty
Net debt: A company's borrowings minus its cash. It is subtracted from enterprise value to arrive at the equity value paid to shareholders. What counts as debt, such as unpaid taxes, deferred revenue or lease liabilities, is often negotiated.; Read the full guide See: Enterprise value See: Equity value See: Cash-free debt-free
Non-competealso: Restrictive covenant, Non-competition clause: A promise by the seller not to start or join a competing business for a set period and area after the sale. It protects the buyer from paying for a business that the founder then competes against. It must be reasonable in scope and length to be enforceable.; Read the full guide See: Key person risk See: Sale and purchase agreement
Non-disclosure agreementalso: NDA, Confidentiality agreement: A contract in which a potential buyer promises to keep information about the business confidential and use it only to assess the deal. It is signed before any detailed or identifying information is shared. It matters most when the buyer is a competitor.; Read the full guide See: Teaser See: Information memorandum See: Data room
Normalised EBITDAalso: Adjusted EBITDA: EBITDA adjusted to remove one-off, unusual or owner-specific items, so it shows the profit the business should keep making under a new owner. Buyers usually value the business on this figure. Every adjustment needs evidence, because buyers will test each one.; Read the full guide See: EBITDA See: Add-backs See: Quality of earnings

P

Private equityalso: PE: Investment funds that buy stakes in private companies using money raised from institutions and wealthy investors. They aim to grow the business and sell it later at a profit, often using borrowed money to fund part of the purchase. Sellers often keep a minority stake alongside the fund.; Read the full guide See: Financial buyer See: Leveraged buyout See: Rollover equity
Process letteralso: Bid instructions: A letter from the seller's adviser telling buyers how the sale will run: deadlines, what an offer must contain and how to submit it. It keeps bidders on the same timetable so offers can be compared. It is a procedural document and does not bind the seller to sell.; Read the full guide See: Auction process See: Indicative offer

Q

Quality of earningsalso: QoE, QofE: A review, usually by accountants, of how reliable and repeatable a company's profits really are. It strips out one-off items and accounting choices to show the profit a buyer can expect to continue. Buyers often base their price on this figure rather than on the statutory accounts.; Read the full guide See: Normalised EBITDA See: Add-backs See: Financial due diligence

R

Registrable controlleralso: RORC: A person or entity with significant interest in or control over a Singapore company: broadly, an interest in more than 25% of the shares or voting power, or the right to appoint or remove directors holding a majority of the voting rights at board meetings, or other significant influence or control. Most companies must keep a private register of registrable controllers (RORC), and a buyer will check it in due diligence. Companies send notices to members holding at least 5% of voting shares to identify their controllers.; See: Share sale See: Legal due diligence
Representations and warrantiesalso: Reps and warranties, Warranties: Statements of fact the seller makes about the business in the sale agreement, for example that the accounts are accurate or there are no undisclosed disputes. If one proves untrue, the buyer may claim compensation. A representation can also support remedies for misrepresentation, in some cases including rescission (unwinding the contract), which is why, in our experience, sellers usually give warranties only. Limits on the amount and timing of claims are a key part of the negotiation.; Read the full guide See: Indemnity See: Disclosure letter See: Warranty and indemnity insurance
Retaineralso: Work fee: A fixed fee paid to an adviser regularly or up front, whether or not the deal completes. It covers the adviser's time preparing materials and running the process. Many engagements combine a retainer with a success fee.; Read the full guide See: Success fee See: M&A adviser
Retradealso: Price chip: When a buyer tries to lower the agreed price or worsen the terms after the seller has granted exclusivity, usually citing something found in due diligence. Some retrades reflect genuine new information; others are tactical. A well-prepared seller with documented numbers leaves less room for either.; Read the full guide See: Exclusivity See: Due diligence See: Quality of earnings
Rollover equityalso: Reinvestment, Rollover: Shares the seller takes in the buyer's company, or in the business after the sale, instead of part of the cash price. It keeps the seller invested in future growth, and is common in private equity deals. Its value depends on the next sale, so it is not the same as cash.; Read the full guide See: Majority recapitalisation See: Private equity See: Consideration

S

Sale and purchase agreementalso: SPA, Share purchase agreement, Asset purchase agreement: The main legally binding contract for the sale, setting out what is sold, the price and how it is paid, the conditions, and the promises each side makes. It is usually the longest and most negotiated document in the deal. Its warranties, indemnities and payment terms decide how much risk the seller keeps after completion.; Read the full guide See: Representations and warranties See: Indemnity See: Conditions precedent
Search fund: An arrangement in which an individual, backed by investors, searches for one business to buy and then runs it as chief executive. It suits owners who want a successor to take over day-to-day management. The buyer typically relies on investor money and borrowing, so deal terms often include deferred payments.; Read the full guide See: Management buy-in See: Vendor financing
Sell-sidealso: Sell-side mandate: The seller's side of a deal: the owners selling the business and the advisers working for them. Sell-side work includes preparing the business, writing the sale documents, finding buyers and negotiating the price and terms. If you are a founder thinking of selling, you are on the sell-side.; Read the full guide See: Buy-side See: M&A adviser See: Auction process
Share salealso: Stock sale, Share purchase: A sale in which the buyer buys the shares of the company, so the company itself, with all its assets, contracts, employees and liabilities, changes owner. It is usually simpler for continuity because contracts stay with the same company. The buyer takes on past liabilities, which is why it asks for warranties and indemnities.; Read the full guide See: Asset sale See: Stamp duty See: Representations and warranties
Share transfer lodgement: The filing that records a change of shareholders with the company registry. In Singapore, ACRA says a transfer of shares must be filed within 14 days, and for a private company the transfer takes effect only once ACRA's electronic register of members is updated. It is one of the final administrative steps of a share sale.; See: Share sale See: Completion See: Registrable controller
Signingalso: Exchange: The moment the buyer and seller sign the sale and purchase agreement and become legally bound to the deal. Ownership may not change hands yet if conditions still need to be met. When signing and completion happen on the same day, it is called a simultaneous sign and complete.; Read the full guide See: Completion See: Sale and purchase agreement See: Conditions precedent
Stamp duty: A tax on certain documents, including transfers of shares. In Singapore, IRAS charges stamp duty on a share transfer at 0.2% of the purchase price or the value of the shares, whichever is higher. IRAS lists the buyer as the party to pay by default, although the agreement can allocate it differently.; See: Share sale See: Net asset value
Strategic buyeralso: Trade buyer, Corporate buyer: A company that buys another business because it fits its own operations, for example a competitor, supplier or customer. It may pay more because it can save costs or grow sales by combining the two. It also tends to want full control and to merge the business into its own.; Read the full guide See: Financial buyer See: Synergies See: Integration
Success feealso: Completion fee: The part of an adviser's pay that is due only if the deal completes, usually worked out as a percentage of the deal value. It aligns the adviser with getting a deal done. Sellers should check exactly what value the percentage applies to, including any deferred or earn-out payments.; Read the full guide See: M&A adviser See: Consideration
Synergies: The extra value a buyer expects from combining two businesses, through lower costs, higher sales or both. They explain why a strategic buyer may pay more than an investor. Sellers rarely get paid for all of them, but knowing what they are strengthens a negotiation.; Read the full guide See: Strategic buyer See: Integration

T

Teaseralso: Blind profile, One-pager: A short, usually anonymous summary of a business for sale, sent to potential buyers to test their interest. It describes the business without naming it. Interested buyers then sign a non-disclosure agreement before receiving more detail.; Read the full guide See: Non-disclosure agreement See: Information memorandum
Term sheet: A summary of the key terms of a proposed deal, often in table or bullet form. It serves a similar purpose to a letter of intent and is mostly non-binding. It becomes the starting point for the lawyers drafting the sale and purchase agreement.; Read the full guide See: Letter of intent See: Sale and purchase agreement
Transfer of a going concernalso: TOGC: In Singapore, a sale of a business as a running operation that meets IRAS conditions is not treated as a supply for GST purposes, so no GST is charged on the transfer. IRAS says a mere transfer of assets will not qualify, the buyer must carry on the same kind of business, and the business must be a going concern when transferred. The buyer must also already be, or immediately become, GST-registered (a taxable person).; See: Asset sale See: Consideration
Transition services agreementalso: TSA: A contract under which the seller keeps providing certain services to the sold business for a limited time after completion, such as IT, payroll or accounting support. It is common when a business is carved out of a larger group. It should set out scope, price and an end date.; Read the full guide See: Integration See: Asset sale

V

Vendor due diligencealso: VDD, Sell-side due diligence: Due diligence the seller commissions on its own business before going to market, then shares with buyers. It surfaces problems early, while the seller still controls how they are explained. It costs money up front but can shorten the buyer's review.; Read the full guide See: Due diligence See: Quality of earnings
Vendor financingalso: Seller note, Vendor loan, Vendor note: When the seller agrees to receive part of the price later as a loan to the buyer, repaid over time with interest. It helps a buyer who cannot raise all the money up front. The seller becomes a creditor of the buyer, so the risk of not being repaid is real.; Read the full guide See: Deferred consideration See: Management buyout See: Search fund

W

Warranty and indemnity insurancealso: W&I insurance, Representations and warranties insurance, RWI: An insurance policy that pays out if the seller's warranties prove untrue, so the buyer claims against the insurer rather than the seller. It can let a seller walk away with more of the price and less ongoing exposure. It does not usually cover problems the buyer already knew about.; Read the full guide See: Representations and warranties See: Indemnity See: Escrow
Working capital adjustmentalso: Working capital peg, NWC adjustment: An adjustment to the price if the business's working capital at completion is above or below an agreed normal level. Working capital is the money tied up in stock and unpaid customer invoices, less the amounts owed to suppliers. It stops a seller from running down stock or chasing in receivables just before the sale, and stops a buyer from underpaying.; Read the full guide See: Completion accounts See: Locked box See: Net debt