Reference desk
Business Acquisition Glossary
The deal terms buyers encounter most, translated into plain English and connected to the diligence decision behind each one.
Add-back
An expense added to reported profit to estimate adjusted earnings. It should be documented and genuinely discretionary, owner-specific, or nonrecurring.
Read the buyer guide →Asset purchase
A transaction in which the buyer acquires specified assets and assumes specified liabilities rather than acquiring the entity itself.
Read the buyer guide →Debt-service coverage ratio (DSCR)
Cash flow available for debt service divided by required principal and interest payments.
Read the buyer guide →Earnout
Contingent purchase consideration paid if defined post-close performance or events occur.
Read the buyer guide →EBITDA
Earnings before interest, taxes, depreciation, and amortization. It does not automatically add back owner compensation.
Read the buyer guide →Enterprise value
Value of the operating business before considering cash and debt adjustments used to reach equity value.
Read the buyer guide →Equity purchase
A transaction in which the buyer acquires ownership interests in the entity and therefore its assets, contracts, history, and liabilities.
Read the buyer guide →Letter of intent (LOI)
A preliminary document describing proposed economics and process, with binding and nonbinding provisions identified.
Read the buyer guide →Normalized earnings
Historical earnings adjusted to represent ordinary, recurring economics under the expected post-close operating model.
Read the buyer guide →Quality of earnings (QoE)
Transaction-focused analysis of the accuracy, recurrence, sustainability, and cash conversion of reported earnings.
Read the buyer guide →Seller financing
Purchase-price consideration documented as a debt obligation from the buyer to the seller.
Read the buyer guide →Seller’s discretionary earnings (SDE)
An adjusted earnings measure intended to estimate the total financial benefit available to one working owner.
Read the buyer guide →UCC financing statement
A public filing that gives notice of a claimed security interest in identified collateral.
Read the buyer guide →Working-capital target
The agreed normalized level of included current assets less included current liabilities expected at closing.
Read the buyer guide →Educational definitions only. Consult qualified legal, accounting, tax, valuation, and lending professionals for transaction-specific advice.