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M&A Glossary
Definitions of all things M&A related
These terms are taken from CFI’s advanced financial modeling course on
mergers and acquisitions modeling.
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Acquirer
Acquisition
The purchasing company acquires more than 50% of the shares of the
acquired company and both companies survive.
Amalgamation/Consolidation
The joining of one or more companies into a new entity. None of the
combining companies remains; a completely new legal entity is formed.
Asset Deal
The acquirer purchases only the assets of the target company (not its
shares).
Backward Integration
Bootstrap Effect
One of the poor reasons to make a merger. If the target’s P/E ratio is
lower than the acquirer’s P/E ratio, the EPS of the acquirer increases
after the merger. However, it is purely an accounting/numerical
phenomenon, and no value or synergies are created.
Cash Consideration
The portion of the purchase price given to the target in the form of cash.
Compensation Manipulation
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Conglomerate
Dilution
Economies of Scale
Economies of Scope
Empire Building
The value of the purchase price over and above the net book value of
assets (total purchase price minus the net book value of assets).
The increase or decrease in the net book value of assets to arrive at the
fair market value.
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Friendly Takeover
Forward Integration
Goodwill
The excess purchase price over and above the target’s net identifiable
assets (after fair value adjustments).
Horizontal Integration
Hostile Takeover
Identifiable Assets
An asset that can be assigned a fair value; can include both tangible and
intangible assets.
Intrinsic Value
Merger/Statutory
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Offer Price
This may include due diligence fees, legal fees, accounting fees, etc.,
related to the deal.
The number of shares outstanding after the transaction has closed and
additional equity has been issued.
Restructuring Charges
Any fees or charges related to early debt repayments that are part of a
restructuring.
Revenue Enhancements
Sensitivity Analysis
Any discount (if any) to the current market price that will be used to
determine the number of shares the target receives.
Share/Stock Deal
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The acquirer purchases all the shares of the target (and assumes all
assets and liabilities).
Stock Consideration
The portion of the purchase price given to the target in the form of
shares of the acquirer’s stock.
Subsidiary
Acquirer completely takes over the target but preserves the target’s
brand for the sake of brand reputation or customer base.
Synergies
Takeover Premium
The percentage above the target’s current share price (or VWAP) the
offer price represents.
Target
Timing of Synergies
Vertical Integration
VWAP
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Creeping Takeover
Acquirer slowly, over a period of time, buys the shares of the target in
the stock market to gain a controlling interest in the company.
Dawn Raid
A takeover attempt that buys all available shares of the target company
at the current market price as soon as the stock exchange is open for
business.
Godfather Offer
Tender Offer
Toehold Position
Target selling the most valuable parts of the company (crown jewels) if a
hostile takeover occurs. This deters acquirers from pursuing the hostile
takeover.
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Dead-hand Provision
Flip-in
Flip-over
Golden Parachute
Greenmail
Target company repurchasing stock from the acquirer or a third party for
a premium price to avoid the stock falling into the hands of the acquirer.
Killer Bees
Lobster Trap
Poison Pill
Poison Put
Sandbagging
Target company playing along with the hostile bid and stalling for time
while waiting for a white knight to appear.
Show-stopper
Supermajority Amendment
An ally of the target company that does not buy enough shares to gain a
controlling interest, but enough to prevent the hostile takeover acquirer
from gaining a controlling interest.
Additional Resources
Thank you for reading CFI’s M&A Glossary of terms and definitions for
understanding mergers and acquisitions. These terms were taken from
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To keep learning and advancing your career these CFI resources will be a
big help:
M&A Process
Horizontal Mergers
Types of Synergies
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