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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Bad Faith Absentee Owner W-2 Wage S Corporation Closing

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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S Corporation

Definition

Short for “Subchapter S Corporation”. A state-incorporated business that elects special tax treatment.

Tips

An S Corporation does not pay income taxes. Instead, its owners pay income taxes on their proportion of the corporation’s profits allocated to them on their K-1 tax form (IRS Form 1065) for each fiscal year. S Corporation earnings are taxed only one time because earnings pass through to the investors.

S Corporation

Definition

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