Resources: Glossary

Don’t be confused or intimidated by any terms or abbreviations in the M&A world. You’ll find answers here.

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APA = Asset purchase agreement

CA = Confidentiality agreement

CIM = Confidential information memorandum

COGS = Cost of goods sold

DBA = Doing business as

DCF = Discounted cash flow

DPA = Definitive purchase agreement

EBITDA = Earnings before interest, taxes, depreciation, and amortization

ESOP = Employee stock ownership plan

FMV = Fair market value

GAAP = Generally accepted accounting principles

IP = Intellectual property

IRR = Internal rate of return

LOI = Letter of intent

MAC = Material adverse change

MBI = Management Buy-In

MBO = Management Buyout

NDA = Non-disclosure agreement

PE = Private equity

PEG = Private equity group

ROI = Return on investment

SDE = Seller’s discretionary earnings

SPA = Stock purchase agreement

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Absentee Owner

Definition

A business owner who is not personally involved in the management or operations of a business.

Tips

The application of this term varies; some refer to business owners as absentee owners if they spend a minimal amount of time in the business, while others reserve this definition for when a business owner has no involvement at all. Absentee owners are more vulnerable to theft by employees unless proper internal controls are implemented in the business.