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M&A Glossary

Purchase Price

The final price for a business that is paid at closing.

Example

A seller could ask $100 million for his hot dog stand, though the actual purchase price may be an altogether different matter.

Tips

Asking price is the price that the seller initially asks, whereas purchase price is the price that the parties actually agree to. Some sellers mistakenly attempt to estimate the value of their business based on the asking prices for similar businesses on the market. This is a fallacy, as anyone can ask any asking price they want.

Related M&A Terms

Pass-Through Entity

A company that does not pay income taxes directly, but rather pays taxes through the owners of the company on an individual basis in an effort to avoid double taxation....

Personal Property Taxes

Taxes that are paid on the personal property of a business other than inventory, such as the hard assets used in the operations of the business, including machinery, computers, equipment,...

Platform Company

A large company (i.e., platform company), that is used as the foundation to acquire and add onto smaller companies (also known as add-on or bolt-on acquisitions) by a private equity...

Private Equity Firm / Private Equity Group (PE, PEG)

A company that raises money from institutional investors and then invests these funds into private companies. Tips Private equity groups raise pools of capital from limited partners, such as pension...

Private Equity Recapitalization

A reorganization of a company’s capital structure, including the debt and equity, whereby a private equity firm purchases less than 100% of a company, leaving the seller with a remaining...

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