Accretive mergers occur when a company with a high price to earnings ratio purchases a company with a low price to earnings ratio. This makes the purchasing company’s earnings per share increase. This type or merger is the opposite of a dilutive merger.
Asset Based Loan:
An asset-based loan is a loan, often for a short term, secured by a company’s assets. Real estate, A/R, inventory, and equipment are typical assets used to back the loan. The loan may be backed by a single category of assets or some combination of assets, for instance, a combination of A/R and equipment.
It is a process and a set of procedures used to determine the economic value of an owner’s interest in a business.
Cash Flow Loans:
Borrowing cash typically to meet day-to-day operations or acquisitions. Reasons for needing a cash flow loan could be seasonal-demand changes, business expansion or changes in the business cycle.
Cash inflows are usually acquired through operations, investment, and financing.
Cash outflows usually result from investments or expenses.
What is the makeup of the customer base? How many clients make up the top 80% of revenues?
Congeneric Mergers take place when two merging companies are in the same general market but don’t have the same supplier or customer relationships.
Conglomerate Mergers occur when two merging companies work in separate industries.
A “demerger” is a word sometimes used to describe a firm that instead of merging with another firm splits its original company in two creating a second company listed on the stock exchange.
Dilutive mergers take place when a company with a low price to earnings ratio acquires a company with a high price to earnings ratio. This causes the purchasing company’s earnings per share to decrease. This type of merger is the opposite of an accretive merger.
Earnings before interest, taxes, depreciation and amortization (EBITDA):
EBITDA is a metric used both in stock analysis and in determining a company’s ability to earn a profit. It is based primarily on the following equation:
EBITDA = Operating Revenue – Operating Expenses + Other Revenue
The operating expenses do not include interest, taxes, depreciation, or amortization.
How a company determines its EBITDA may differ because it is not a standardized definition; it is not defined by the Generally Accepted Accounting Principles (GAAP).
Enterprise value, sometimes referred to as Firm Value (FV) or Total Enterprise Value (TEV), is an economic measure that reflects the market value of the entire company including a sum of claims of the preferred and minority shareholders, the debtholders, and the common equity holders. Enterprise Value is frequently used in accounting, financial modeling, and business valuation to name a few.
Fair Market Value:
A fair market value is often an estimate of what a willing buyer would pay to a willing seller, both in a free market, for an asset or any piece of property. If such a transaction actually occurs, then the actual transaction price is usually the fair market value.
Fair market value of fixed assets and equipment (FMV/FA)
This is the price you would pay on the open market to purchase the assets or equipment.
The American Journal of Family Law states that Goodwill is “that intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified. It can be separated into two parts, defined as follows:
Enterprise goodwill is the value of earnings or cash flow directly attributable to the enterprise’s characteristics or attributes. Enterprise goodwill, sometimes referred to as practice goodwill is a function of earnings from repeat business (customers) that will seek out the business (as opposed to the individual), new consumers who will seek out the business, and new referrals who will be made to the business. Most appraisers approach the allocation by simply dividing the attributes into personal and enterprise, but you can take it one step further which offers a reasonable position if challenged and provides a consistent method and a defensible bases for your opinion.
A Horizontal Merger occurs when two companies that produce like products in the same industry merge.
Wholesale value of inventory, including raw materials, work-in-progress, and finished goods or products.
Leasehold improvements (LI):
These are the changes to the physical plant that would be considered part of the property if you were to sell it or not renew a lease.
LOI – Letter of Intent:
The term used to describe the written offer by the Buyer. Also sometimes called a Term Sheet.
In business or economics a merger is a combination of two companies into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a “merger” rather than an acquisition is done purely for political or marketing reasons.
Owner benefit (OB):
This is the seller’s discretionary cash for one year; you can get this from the adjusted income statement.
Reverse Triangular Merger:
An acquisition by merger where the acquiring corporation forms a subsidiary to effect the merger through a stock exchange. As a result of the merger, the newly established subsidiary ceases to exist while the target survives.
SBA loans are used to allow individuals to buy existing businesses. The SBA helps Americans start, build and grow businesses. This is done through an extensive network of field offices and partnerships with public and private organizations. There are two types of financing: equity and debt financing. When looking for money, you must consider your company’s debt-to-equity ratio – the relation between dollars you’ve borrowed and dollars you’ve invested in your business. The more money owners have invested in their business, the easier it is to attract financing.
SDE – Seller Discretionary Earnings:
SDE is defined as income before taxes, interest, non-operating and non-recurring income or expenses, depreciation, and one full-time owner’s salary.
Normally performed in the CBR – determining the Strengths, Weaknesses, Opportunities and Threats of the business.
Vertical Mergers take place when two companies that create the same product but in different stages of development merge.