| B |
| M&A Term | Definition | Note |
| B Reorg | a Stock-for-Stock Acquisition treated as a Tax-Free Reorg under Section 368(a)(1)(B) of the US Internal Revenue Code if, among other things, the acquiring corporation exchanges solely its own voting Stock (or voting Stock of its 80 percent Parent) for 80 percent of the combined voting power and 80 percent of the total number of Shares of all Classes of a Target corporation’s non-voting Stock | N1 |
| Back Office | Administrative activity related to investment management, for example, settlement, pricing and plan accounting. (See also front office.) | N6 |
| Back-End Merger | a Squeeze-Out Merger that follows a Stock Acquisition to complete an Acquisition of 100 percent of a Target Company’s outstanding securities. In many, but not all cases, the Back-End Merger is pursuant to an Acquisition Agreement that requires the Buyer to initiate the Acquisition through a Tender Offer or Exchange Offer for a majority or all of the Target Company’s voting equity Securities. | N1 |
| Backsolve Method | a method within the Market Approach whereby the total Equity Value (or the value of a specific equity class) of a business is implied from a recent transaction in the business’ securities. | N7 |
| Backstop Facility | loan which a bank only grants if the Borrower has no other possibility to cover its borrowing requirement, e.g., through prior issuance of Bonds on the capital market | N1 |
| Back-to-Back Confidentiality Agreement | assumption of rights and obligations by a third party under a Confidentiality Agreement which has been concluded by other parties | N1 |
| Back-to-Back Financing | a financing structure according to which the Financing Sources (mostly banks) are granted collateral by certain shareholders participating in the financing | N1 |
| Backwardation | Situation where the price for future delivery of a commodity in a forward contract is less than spot price of the commodity. (See also contango.) | N6 |
| Bad Debt | Debt which is viewed as unlikely to be recovered by the creditor and may be written off as worthless. | N6 |
| Bad Leaver | an employee or manager who holds Shares of the company and leaves his/her office because of his/her own interests or who is terminated for good cause (i.e., because of his/her own default or without the company giving the employee contractual notice). Leaving often results in a reduction in the Shares, Options, Earn-Out payments, etc. which may have otherwise been made to the employee. | N1 |
| Bad Leaver | A bad leaver is a shareholder who exits the company prematurely (see also4Leaver). A leaver becomes a bad leaver if he leaves for specific reasons defined by contract that relate to the individual person or his conduct. Examples include termination of employment for good cause by the company, resignation without the company having defined an important reason to cover the specific case, or other circumstances stipulated by contract. A bad leaver usually receives a substantially lower severance payment than a4Good Leaver. If the shares held by a leaver are subject to a4Call Option, his shares will be acquired at a lower price. Bad leaver provisions can also be found in management share schemes (see also 4Management Participation). | |
| BaFin (Bundesanstalt für Finanzaufsicht) | the German Federal Financial Supervisory Authority (BaFin) is responsible for the supervision of banks and financial services providers, insurance undertakings and Securities trading. It is an autonomous public-law institution subject to the legal and technical oversight of the Federal Ministry of Finance. BaFin is funded by fees and contributions from the institutions and undertakings under its supervision. | N1 |
| Bake Off | see Beauty Contest | N1 |
| Balance Sheet | a component of Financial Statements on which a company reports its assets, liabilities and equity as of a given point in time. In contrast to an Income Statement, which depicts a company’s operations over a period of time, a Balance Sheet provides a “snapshot” as of a moment in time. The term Balance Sheet derives from the accounting principle that a company’s assets must equal (or “balance” with) its liabilities plus shareholders’ equity. See also Income Statement. | N1 |
| Balance Sheet | a statement of the assets, liabilities, and capital of a business at a particular point in time, detailing the balance of income and expenditure over the preceding period. Makes up part of the financial statements or statutory accounts. | N5 |
| Balanced Management | Where an investment manager is given broad discretion in relation to the management of all the main asset classes. (See also specialist management.) | N6 |
| Bank Guarantee | an undertaking from a bank to cover a debt, risk or liability on a transaction. In other words, if the debtor fails to settle a debt, the bank will cover it. Similar to a Letter of Credit. | N1 |
| Bank Guarantee | A guarantee covering certain aspects of a deal claim against the seller. It is issued by a bank to compensate the buyer, should the seller not pay certain losses incurred by the buyer. The bank has recourse to the seller in order to recover the guarantee. If the seller does not pay the claim, it will be paid by the bank, instead of the seller, once certain conditions have been met, after which the bank demands repayment of the claim, on top of the fees charged for the guarantee. | N3 |
| Bank Guarantee | a guarantee issued by a bank to ensure that any losses will be compensated. If the seller does not pay the claim, it will be paid by the bank, instead of the seller, once certain conditions have been met, after which the bank demands repayment of the claim. Banks charge a fee for issuing this guarantee. | N4 |
| Bank Guarantee | a guarantee issued by a bank to ensure that any losses will be compensated. If the seller does not pay, it will be paid by the bank, instead of the seller. In smaller deals, it is very hard, nigh on impossible, to get from the bank. | N5 |
| Bank Levy | refers to certain taxes due by financial institutions in connection with the levels of risk on their lending activities. These taxes cover the French tax levied pursuant to Article 235 ter ZE of the French tax code (Code général des impôts), the United Kingdom tax levied pursuant to Section 73 of, and Schedule 19 to, the United Kingdom Finance Act 2011, or any other tax consisting of a Bank Levy in the sense referred to in the joint statement released by the French, UK, and German governments on 22 June 2010 that is levied or imposed in France or in any other jurisdiction. This term is used in a Credit Agreement when the parties intend to clearly exclude any Indemnification of the Lenders for any loss, liability, or cost suffered for or on account of such taxes. | N1 |
| Bankability | the responsibility for the financing of a project or a transaction, or the acceptance of a specific financial structure from the banks’ point of view, that was proposed by the Borrower | N1 |
| Bankable Report | A Due Diligence Report that analyses the company in summary form and contains an overview of the most important findings of4Due Diligence but is not as concise as a4Red Flag Report. However, the terms used are not standardised and in some cases a bankable report also means a very detailed due diligence report (see also4Short Form Report). | N2 |
| Bank-Bridge Structure | a set of Commitment Papers that contains terms for both a senior secured Credit Facility and a Bridge Facility | N1 |
| Banker Book | a written financial or other presentation by a Financial Advisor, usually to the Management or Board of Directors of the Financial Advisor’s client (usually the Target Company or the Buyer), in the course of an M&A transaction. See also Board Book or Deck. | N1 |
| Bank-Only Deal | financing consisting only of bank debt (i.e., no Bridge Facility or Securities) | N1 |
| Bankruptcy | in the US, Bankruptcy is a federal court process under the Bankruptcy Code whereby a company restructures its debt under the auspices of the Bankruptcy Court. There are advantages (such as the ability to Cram-Down a plan on dissenting creditors) and disadvantages (such as high costs and public disclosure requirements) to restructuring debts in a US Bankruptcy, as opposed to out of court. Restructuring debts in Europe is typically an out of court process, although court-based procedures such as Schemes of Arrangement are used as implementation tools, with Insolvency marking the typically court-driven end of the line. See also Insolvency. 1. (HKG) in Hong Kong, the term Bankruptcy is generally only used to refer to individual debtors and the applicable process under the Bankruptcy Ordinance to realise an insolvent individual’s assets and distribute the proceeds amongst his/her creditors. With respect to corporate insolvencies, the terms commonly used are Liquidation or Winding Up. |
N1 |
| Bankruptcy | Legally declared state that is usually triggered by a company’s failure or impaired ability to meet its contractual debt obligations. Usually results in restructuring of the company’s debt or liquidation of the company. (See also distressed debt.) | N6 |
| Bankruptcy Code | Title 11 of the United States Code | N1 |
| Bankruptcy Remote Vehicle | a type of Special Purpose Entity | N1 |
| Barbell Strategy | Investment technique, typically related to a bond portfolio, under which a manager holds a combination of both shorter-dated and longer-dated bonds relative to the benchmark, but where overall duration is broadly in line with the benchmark. | N6 |
| Bargain | Another word for transaction or deal. It does not imply that a particularly favourable price was obtained. | N6 |
| BARRA | Software programs developed by Barra International and used to evaluate portfolio risk, chiefly in equity investments. | N6 |
| Base Case Model | refers to the financial Model and Business Plan required to be prepared and warranted by the Borrower and delivered to the Lenders under the Credit Agreement as a Condition Precedent, particularly in Leveraged Buyouts. The scheduled repayment installments under any amortizing loans and the levels of the Financial Covenants are set by reference to the agreed Base Case Model (in the case of Financial Covenants, through the application of the agreed deviations from the anticipated performance of the business set out in the Base Case Model). Also referred to as the Business Plan, although in certain uses of the term, the Base Case Model can be one case within the Business Plan. | N1 |
| Base Currency | Currency of the country in which the investor is based. | N6 |
| Base Rate | the rate quoted by individual banks to their customers as the rate at which such banks are prepared to lend money and pay for deposits 1. (HKG) in Hong Kong, also known as “Prime Rate” or “Prime Lending Rate” |
N1 |
| Base Rate | Benchmark for other interest rates, including personal loans and mortgages. The high street bank’s base rate changes following changes made by the Bank of England to its rates. The Bank of England moves base rates by changing the dealing rates at which it buys bills from the discount houses. The equivalent term in the USA is the “prime rate”. | N6 |
| Basis of Value | also known as Standard of Value. | N7 |
| Basis Point | one one-hundredth of a percentage point (e.g., 50 Basis Points equals 0.50 percent). See also bps. | N1 |
| Basis Point | One hundredth of a percentage point (= 0.01%). Accordingly, 250 basis points correspond to an interest rate of 2.5%. | N2 |
| Basis Point | 1/100 of 1%, or 0.01%, thus 100bp = 1%. | N6 |
| Basis Points | hundredths of one percent of interest. The interest on a loan is often expressed as EURIBOR plus a number of basis points. | N4 |
| Basis Risk | Risk that arises when an investor attempts to hedge a position in the market using an instrument that has an underlying security which is different from the security whose risk is being hedged. For example, using a FTSE 100 future to hedge a FTSE All-Share UK equity portfolio. | N6 |
| Basket | in circumstances where Indemnification is provided for, Basket generally refers to a specified minimum dollar amount one party’s losses must exceed before the other party has an obligation to pay damages to the first party for the losses. See also Deductible and Tipping Basket. | N1 |
| Basket | Contract clause that prevents the other party from making minor claims; warranty claims can only be asserted if the aggregate of all claims exceeds a certain limit (4Threshold). The parties may also agree that only the amount exceeding the threshold (4Deductible;4Excess Only) or the total amount of the claim (4First Dollar) can be recovered. | N2 |
| Basket | Once the threshold has been reached, the loss will be compensated in full. | N4 |
| BCD | see Book Closure Date (BCD) | N1 |
| Bear | Individual who believes that a security, sector or the overall market is going to fall in price. Opposite of bull. | N6 |
| Bear Hug | an Offer by a Bidder to buy a Target Company at a price usually meaningfully above the Target’s current Share price. Called a Bear Hug because the Acquirer hopes the price is impossible or at least hard to resist. A Bear Hug can be oral or written and can be non-public or public. A Bear Hug can also start as an oral, non-public communication and later be reiterated in writing and/or disclosed publicly. The purpose of the Bear Hug letter is to put pressure on the Target Company Board to negotiate a transaction. 1. (UK) this is a term for the public announcement commencing a UK Hostile Takeover. See also Virtual Bid and Offer Period (in relation to UK public Takeovers). |
N1 |
| Bear Market | bad times. Hang in there for a Bull Market. | N1 |
| Bear Market | a market in which share prices are down with investors and dealers likely to be selling, pushing prices down. | N5 |
| Bear market | Period of sustained stock market decline. Opposite of bull market. | N6 |
| Bearer Bond | Bond with no central register of bondholders. Entitlement to payments of interest and principal depends on physical possession of the bond. Bondholders submit coupons to the issuer (cut out from the bond) to receive each interest payment. | N6 |
| Beauty Contest | a way of providing companies and financial Sponsors with a choice of providers of financial, legal, and other professional services in connection with a potential transaction. A Beauty Contest normally involves drawing up a short-list of potential firms invited to pitch for business, usually by presentation and interview. Also called a Beauty Parade or Bake Off. | N1 |
| Beauty Contest | Selection process for advisors (investment banks, lawyers, auditors, etc.) in the initial stages of a transaction. They compete for the business in a4Pitch. | N2 |
| Beauty Parade | see Beauty Contest | N1 |
| Beauty Parade | Competitive review of investment managers, custodians, consultants or other service providers, usually involving written submissions and presentations. | N6 |
| Bed Bug Letter | a name for a letter by a participant in a Proxy Contest to the SEC staff arguing that the Proxy Material of another participant contains false or misleading information or is otherwise deficient under the Proxy rules. See also Sand in the Gears Letter. | N1 |
| Belgian GAAP/Belgian General Accepted Accounting Principles | the generally accepted accounting principles in Belgium. This term refers to Belgian accounting law and accounting principles applicable in Belgium. If the SPA includes a pricing mechanism based on the closing accounts, it is important to specify under which GAAP these closing accounts must be drawn up. This could be under Belgian GAAP, or under Dutch GAAP, US GAAP, Swedish GAAP, etc., or alternatively under IFRS. | N4 |
| Bell Curve | See normal distribution. | N6 |
| Bellwether | Stock or bond that is widely believed to be an indicator of the condition of the overall market. | N6 |
| Below Par | Having a current price below face or par value. | N6 |
| Below the Line | in Financial Statements, items which affect the Balance Sheet rather than the Income Statement. Items such as extraordinary items which have no effect on the profit or loss in the current accounting period, are therefore Below the Line of gross profit. | N1 |
| Benchmark | Pre-defined reference value used to assess the performance of a company or management team; in transactions, for example, benchmarks can be agreed with regard to specific metrics (e.g.4EBIT;4EBITDA), which are then linked to specific legal consequences. | N2 |
| Benchmark | Measure against which a portfolio’s performance, risk and construction is assessed. The benchmark may take the form of a market index for portfolios focusing on a particular market — for example, MSCI World Equity Index — or be a peer group average or median. | N6 |
| Benchmark Portfolio | Theoretical portfolio of assets against which the performance of an actual portfolio is monitored. | N6 |
| Beneficial Owner | Person who enjoys the benefits deriving from a security or property. May be different from the legal owner in whose name the title is registered. | N6 |
| Best and Final Bid | an aspirational description by a Target Company of the kind of Offer it wants to receive from a Bidder. The term is also often used by a Bidder to describe the Bidder’s current Offer and thereby encourage the Target Company to give up its aspirations for a better Offer. When the term is used by the Bidder it sometimes is, in fact, an accurate description of the Offer. Other times, it is a bluff and the Bidder would in fact be willing to pay more. | N1 |
| Best Efforts | a common provision in an Acquisition Agreement to describe how hard a party needs to work to make good on its commitments. Like many other familiar contract terms (e.g., All or Substantially All), just what constitutes Best Efforts is far from clear. In many contracts, the nature of Best Efforts is modified by one or several adjectives, such as “Reasonable Best Efforts” or “Commercial Best Efforts” or even “Commercially Reasonable Best Efforts.” The point of the adjectives is to give greater clarity about just how hard (or not) the party must try to fulfill its promise. See also Best Endeavors. | N1 |
| Best Efforts | Part of a contractual obligation; although the obligated party does not owe any specific contractual fulfilment, often because this is not within its area of control (e.g. approvals from official bodies or the consent of third parties), by agreeing to a best efforts clause the party undertakes to do everything in its power to achieve the desired outcome. | N2 |
| Best Efforts Underwriting | Obligation on the part of a bank (or consortium of banks) to make every effort to sell the securities being issued (e.g. in an4IPO); in4Hard Underwriting, a guarantee to place the securities is provided. | N2 |
| Best Endeavors | see Best Efforts | N1 |
| Best Execution | Execution of a securities transaction at the best price available in the market at the time of the transaction. | N6 |
| Best Knowledge | the Seller’s obligation to assume liabilities is often restricted by a knowledge qualifier which is generally based on knowledge of specific persons or by Duty of Care obligations. The exact knowledge qualifier is to be defined in the agreement. | N1 |
| Best Knowledge | Qualification such that in the context of4Reps & Warranties the contractual party giving the warranties is responsible for the veracity of the warranties only to the best of his knowledge. The contract must define exactly whose knowledge is used as the basis, whether only actual knowledge is applicable or whether (grossly) negligent ignorance is enough to constitute a breach, and also whether the relevant persons have a duty of care to make further enquiries (see also4Knowledge Qualifier). | N2 |
| Best Practices | a common description of the nature of a corporate governance policy or procedure. There is no authoritative source for determination of Best Practices; it is all in the eye of the beholder. Accordingly, the concept is usually used to describe or prescribe corporate governance conduct that the speaker believes, or wants a company to believe, is the “right” thing to do. | N1 |
| Bet the Company | a transaction that has potential Upside benefits to transform the applicable company and the “downside” potential pitfalls to cause significant damage | N1 |
| Beta | Statistical measure of risk or volatility. Indicates the sensitivity of a security or portfolio to movements in the market index. Securities/portfolios with a beta greater than one are expected to be more volatile than the market as a whole, outperforming in rising markets and underperforming in falling ones. | N6 |
| Beta | a measure of the relative risk (or sensitivity) of an individual security versus the risk of a market portfolio. See also Capital Asset Pricing Model, Systematic Risk, Unsystematic Risk, Levered Beta, and Unlevered Beta. | N7 |
| Bible | only a few would call this holy; this is the name given to the collection of principal deal documents which are collected together after Closing for ease of reference for the main deal participants. Traditionally prepared in paper format but now more commonly electronically on CDs. Also known as the Closing Set. | N1 |
| Bible / Bible of Documents | Set of documents comprising all the agreements and documentation relevant to the transaction (e.g.4SPA including annexes,4Closing Memorandum, powers of attorney, etc.). It is assembled after 4Closing (or another significant interim step in the transaction, e.g.4Signing) so that the documents can be easily accessed at a later stage. | N2 |
| Bid | another name for an Acquisition Proposal or Offer made pursuant to an Auction | N1 |
| Bid | An4Offer to conclude an agreement; if it is non-binding, it is referred to as an4Indicative Bid / Indicative Offer, in contrast to a4Binding Bid. | N2 |
| Bid Conditions | conditions contained in a Bid | N1 |
| Bid Letter | Offer letter from an interested party in the context of an auction procedure. | N2 |
| Bid Price | Price at which a security or a unit in a pooled fund can be sold. (See also ask price, offer price, mid price.) | N6 |
| Bid Process Letter | a letter, usually sent by a Seller’s Financial Advisor, to one or more potential Bidders describing terms and conditions of an Auction to which the Bidders must adhere. Typically contains a set of conditions and timetable to be followed. Most Bid Process Letters explicitly retain in the Seller the right to change, waive, or ignore all such terms and conditions in the Seller’s sole discretion. Nonetheless, Bidders typically comply, unless the Bidder decides to try to preempt the described Bid Process. See also Preemptive Bid. | N1 |
| Bid/Offer (Bid/Ask) Spread | Difference between the buying price (offer or ask price) and selling price (bid price) of a pooled fund unit or a security. | N6 |
| Bidco | name given to the Special Purpose Vehicle (SPV) established by a Sponsor as the acquiring entity in a Leveraged Buyout or by a corporation in a Takeover. Usually Bidco will be the main Borrower in Acquisitionrelated Credit Facilities. | N1 |
| Bidder | another name for an Acquirer, Buyer or Purchaser | N1 |
| Bidder Group | a Group of two or more entities acting together to acquire a Target Company. PE Sponsors frequently form a Bidder Group to acquire a relatively large Target Company (thereby lowering each Sponsor’s investment and allowing greater diversification in the Private Equity Fund’s portfolio) or where one of the PE Sponsors may have special expertise relevant to the Target Company but its fund is not large enough to acquire the Target Company on its own. | N1 |
| Bidding Contest | any M&A situation in which two or more potential Acquirers submit Competing Bids | N1 |
| Bidding Process | 4Auction. | N2 |
| Bifurcated Reverse Termination Fee | a Reverse Termination Fee structure in which different fees are payable in different circumstances | N1 |
| Big Four | The four largest auditing firms in the world (Deloitte, PricewaterhouseCoopers, EY and KPMG). Contracts often require that one of the Big Four firms should conduct the audit of a company’s financial statements. | N2 |
| Bill, Treasury | See Treasury Bill. | N6 |
| BIMBO | Buy-In Management Buyout | N1 |
| BIMBO | A type of deal which is a combination of a management buyout (MBO) and a management buy-in (MBI). A BIMBO occurs when existing management – along with outside managers/investors – decides to buyout a company. | N5 |
| Binding (Non) | deal negotiations typically start with non-binding agreements, such as the Letter Of Intent stating a certain level of intent on both sides. As the talks progress, the more binding agreements are entered into, of which the Sale and Purchase Agreement is the ultimate one. | N3 |
| Binding (Non) | the binding nature of clauses or an entire agreement requiring particular attention, usually legal, when preparing documentation between the parties. Non-binding statements are often used initially and formalised into more binding statements/documents as the sale process progresses. | N5 |
| Binding Bid | see Binding Offer | N1 |
| Binding Bid / Binding Offer | 4Final Bid / Final Offer. | N2 |
| Binding Offer | an obligatory Offer of the prospective Purchaser to enter into an Acquisition Agreement regarding the Acquisition of a company or assets (generally made in an Auction). Also called a Binding Bid. | N1 |
| Binominal Lattice Model | a model typically used to estimate the value of an asset or investment that employs a binomial tree to show the different paths the price of an underlying asset, such as a security, might take over the security’s life. | N7 |
| Biz Dev | shorthand for Business Development | N1 |
| BJR | 4Business Judgement Rule. | N2 |
| Blackout Period | see Trading Blackout | N1 |
| Blank Check Preferred Stock | a Class of Preferred Stock that, pursuant to the Charter, may be issued in separate series, with each series having particular preferences and Rights described in a Certificate of Designations adopted by a Board resolution and filed with state officials as a part of the Charter. Because a Board has total flexibility to design the terms of each series of Blank Check Preferred Stock, it can potentially be used as an adjunct to a Takeover Defense. In practice, however, few Takeover Defenses (e.g., in Poison Pills) actually utilize Blank Check Preferred Stock. This is a case of the bark being far worse than the bite. | N1 |
| Blockage Discount | an amount or percentage deducted from the current market price of a publicly-traded security to reflect the decrease in the per security value of a block of securities that is of a size that could not likely be sold in a reasonable period given normal trading volume. | N7 |
| Blocker Vehicle | an entity which is usually put in place between Investors and a Portfolio Company of a Private Equity Fund in order to avoid the allocation of income of the Portfolio Company to the Private Equity Fund | N1 |
| Blocking Minority | the articles of incorporation of a company or company law may provide that a special majority, e.g. 75%, is required at the general meeting to make important decisions. This means that a minority shareholder who owns 25% plus one share could block such decisions at the general meeting. | N4 |
| Blocking Right | a provision in a Security that gives holders a right to block the issuance of certain other prescribed Securities. Sometimes Blocking Rights can only be dismantled by unanimous action; in other cases, a simple majority or a super majority of holders of the Securities with the Blocking Rights can dismantle them. See also Veto Rights. | N1 |
| Blue Book | the colloquial name given to the City Code, as it is published in a blue folder | N1 |
| Blue Chip | a reference to a well-established stock or company with a national reputation and financially sound footing. Products and services from blue chips usually are widely known and used. | N5 |
| Blue Chip Company | Large, well-known company with a long record of profit growth, strong branding and consistent record of paying dividends. | N6 |
| Blue Chips | 1. Shares in major companies listed on an index such as the Dow Jones or Germany’s DAX (see also4Large Cap). 2. Customers or clients of exceptional importance. | N2 |
| Board | shorthand for Board of Directors | N1 |
| Board | In a one-tier (unitary) system, this is the body responsible for both business management and supervision. In a two-tier system, it refers to the body responsible for day-to-day business management of a company, for example the management board of a German Aktiengesellschaft. | N2 |
| Board Book | a Banker Book or Deck usually prepared for the Management or Board of Directors of the Financial Advisor’s client | N1 |
| Board of Directors | governing body of an incorporated company. Its members (the directors) are normally elected by the shareholders of the company (generally at an annual general meeting). Subject to certain matters reserved by law for shareholders, the Board has the ultimate decision-making authority. | N1 |
| Board of Directors | the individuals whose collective legal responsibility it is to manage the business and operations of a corporation. | N5 |
| Board Recommendation | a recommendation by a Board of Directors that shareholders vote upon a proposal in a specified way. Bidders will invariably seek a Covenant and a condition that the Target Company’s Board will recommend the deal. 1. (US) under Delaware judicial precedents, a Target Company’s Board probably does not have the ability to contract away its exercise of its Fiduciary Duties to be able to change its recommendation under all circumstances; hence the Covenant that the Target Company will not change its recommendation almost always is subject to a Fiduciary Out. Exercise of the Fiduciary Out will customarily Trigger a termination right for the Buyer, and such a termination will usually Trigger the payment of a Termination Fee by the Target Company’s Board. 2. (FRA) under French law, in the context of a Tender Offer, the Target’s Board must issue a recommendation to the shareholders 3. (HKG) the Hong Kong Stock Exchange Listing Rules and HK Takeovers Code respectively require Board Recommendations in certain circumstances or transactions. In some situations, a recommendation from an independent board committee may be required. |
N1 |
| Board Seat | providers of growth capital often demand the right to be represented in the board of management. The number of board seats is then included in the negotiations on the terms of the capital increase, as are the majorities required for taking certain decisions. | N4 |
| Boilerplate | a generic name, often having or intended to have a pejorative connotation, for what is viewed by the beholder as standard provisions in a contract, such as choice of law, venue and method of giving notice. More substantive parts of an Acquisition Agreement may also be labeled as Boilerplate by participants who don’t want to be bothered to read or think about them. A word to the wise: there is no such thing as Boilerplate in M&A. | N1 |
| Boilerplate | Clauses included as standard in almost every contract (severability clause, requirement for the written form, list of contact persons, etc.). It is not usually necessary to spend a lot of time negotiating boilerplate items. | N2 |
| Boilerplate Language | see Boilerplate | N1 |
| Bona Fide | shorthand (or some would say a term of art) for a party or state of mind that is both real and meaningful. A Bona Fide Bidder means one which is both serious and has the capability to perform. A Bona Fide Bid is one that is both made by a Bona Fide Bidder and is meaningful in amount and type of currency. | N1 |
| Bona Fide | In good faith, as per section 242 of the German Civil Code (BGB) (see also4In Good Faith). | N2 |
| Bona Vacantia | a description of English law origins that describes property with no apparent owner. See Escheat. | N1 |
| Bond | debt Securities in transferable form issued by companies that have a fixed principal amount and a fixed (or floating) interest rate. Also known as Notes or Debentures. Bonds may be issued by an Acquirer to finance an Acquisition and are very common in LBOs as a significant part of the financing package. | N1 |
| Bond | A type of debt instrument. | N2 |
| Bond | Certificate of debt issued by a government or company, promising regular payments on a specified date or range of dates, usually with final capital payment at redemption. Most bonds are issued with a nominal face value and a coupon, stated as a percentage of their nominal value, although variations on this structure exist. A bond’s price rises as its yield falls, and vice versa. (See also zero coupon bond, index-linked gilt, floating rate bond.) | N6 |
| Bond Rating | Credit rating on a bond. | N6 |
| Bond Yield | Income of a bond as a percentage of the capital invested. As bond yields rise, prices fall, and vice versa. | N6 |
| Bonus Issue | Issuance of free shares by a company to its existing shareholders. No money changes hands and the share price falls pro rata. This is usually used as an exercise to make the shares more marketable (i.e. cheaper per share and therefore more attractive to small investors). Also known as a capitalisation or scrip issue. | N6 |
| Book Value | the amount in the relevant currency stated for particular assets on a company’s Balance Sheet | N1 |
| Book Value | a term used to state the value of a business or an asset as recorded in a firm’s books/accounts. | N5 |
| Book Value | Value at which a security is recorded on a balance sheet, usually the cost of buying it. If securities have been acquired at different times and different periods, the book value will reflect the average buying cost. | N6 |
| Bookrunner | usually an investment bank that arranges the subscription, allocation and after-market for securities in an issue of securities. | N4 |
| Books Closure Date (BCD) | See Record Date | N1 |
| Boom | Period of rapid economic growth. | N6 |
| Boot | cash or other property received as taxable consideration in an otherwise tax-free transaction | N1 |
| Bootstrapping | Method of interpolating government bonds of differing maturities to gain exposure evenly across the whole yield curve. | N6 |
| Borrower | a company that borrows under a Credit Agreement | N1 |
| Borsa Italiana S.p.A. | the entity responsible for the organization and management of the Italian Stock Exchange. Borsa Italiana S.p.A. belongs to the London Stock Exchange group. | N1 |
| Bottom Line | refers to a company’s net income, net earnings or Earnings Per Share. Bottom Line also refers to actions that may decrease or increase a company’s net earnings or overall profit. | N1 |
| Bottom Line | The net income “line” of the income statement | N3 |
| Bottom Quartile | Quartile ranking that is in the bottom 25% of returns. (See also top quartile.) | N6 |
| Bottom-up | Approach to active investment management that gives priority to the identification and selection of companies (with less emphasis accorded to sector and geographical region) to build up an investment portfolio. This is the opposite of a top-down approach. (See also country allocation, stock selection, top-down.) | N6 |
| Bought Deal | an offering of debt or equity Securities in which one or a few Underwriters buy the entire issue at a fixed price before a formal marketing process has commenced | N1 |
| Bourse | Another name for a stock exchange; usually applied in a Continental European context. | N6 |
| Boutique Investment Manager | Firm, generally relatively small in scale of operations, which has as its sole purpose the management of investments for third parties for a fee and which does not participate in other activities such as banking or life assurance. | N6 |
| bps | shorthand for Basis Points and generally pronounced “bips” | N1 |
| Branch | a place of business where a foreign company or corporation regularly conducts its business directly (rather than, for example, through a locally established subsidiary company) | N1 |
| Branch of Business | line of business. Under certain conditions of company law (acquisition of a line of business), an asset deal can be made with legal continuity. | N4 |
| Breach | if a covenant is not met and therefore a breach of covenant occurs, the loan agreements may stipulate that the debt is immediately due and payable or repayable. | N4 |
| Breach (of Contract) | Non-fulfilment or violation of a contractual obligation. | N2 |
| Breakage Costs | a prepayment penalty that has to be paid by the Borrower, if the Borrower wants to repay the loan prior to its maturity or before a fixed interest rate expires | N1 |
| Breakeven Inflation | The rate of inflation that will equalise the returns between fixed interest and inflation-linked securities of the same maturity. For example, if the yield on a 10-year fixed interest gilt is 5% and the real yield on a 10-year index-linked gilt is 2%, then the breakeven inflation rate is 3%. Also known as implied inflation and can be derived from swaps as well as bonds. | N6 |
| Break-Up Fee | another name for Termination Fee | N1 |
| Break-up Fee | Obligation on a negotiating partner to pay what is often a lumpsum amount in the event that the transaction falls through due to reasons for which he is responsible. This deterrent is intended to make the negotiating partner more committed to the transaction. If the deal does collapse, the compensation is used to cover wasted expenditure, especially advisor costs. A break-up fee may be agreed in the4Letter of Intent prior to conclusion of the sale agreement for the eventuality that the transaction falls through. If an agreement is reached (4Signing), it may include a break-up fee for failure to complete (4 Closing). | N2 |
| Bribery Act | the United Kingdom Bribery Act 2010 that sets out criminal law relating to bribery | N1 |
| Bribery Ordinance | the Prevention of Bribery Ordinance of Hong Kong that sets out criminal law relating to bribery | N1 |
| Bridge | shorthand for a Bridge Loan | N1 |
| Bridge Facility | another name for a Bridge Loan | N1 |
| Bridge Facility Term Sheet | an annex to a Commitment Letter that contains a summary of the terms of a Bridge Loan. In a Committed Financing, each series of Notes contemplated to be part of the permanent financing structure is backed up by a Bridge Loan, so in instances with more than one series of Notes (for instance, senior and senior subordinated), there will be multiple Bridge Loans. These multiple Bridge Loans may be described in one or multiple Term Sheets. | N1 |
| Bridge Financing | see Bridge Loan | N1 |
| Bridge Financing / Bridge Loan | Interim financing intended to improve the financial situation of a company (in the short term); bridge financing is commonly used when preparing for an initial public offering (4IPO). If the purpose of bridge financing is to improve the equity ratio, a subordinated loan must be used. | N2 |
| Bridge Loan | short-term loans that typically (although not always) are intended to be replaced by other, more permanent, funding. The purpose of a Bridge Loan is to provide a Bidder with Committed Financing in the context of an Acquisition Agreement that is intended or required to be Fully Financed at the time it is signed, as would be the case if the long-term funding plan for the Acquisition included Notes or Bonds, which would not be issued prior to consummation of the Acquisition. The name “Bridge” comes from its purpose of bridging the timing gap in the acquisition financing plan. Traditionally, Bridge Loans are used by PE Sponsors in Auction situations, but corporate Buyers also sometimes use Bridge Loans to finance Acquisitions. In the Commitment Papers context, Bridge Loans are sometimes referred to as the Bridge Facility. See also Bridge Financing. | N1 |
| Bring Down | shorthand for a document that deals with an interval of time, most often between signing an agreement and Closing of the applicable transaction. In many cases, the Bring Down will reaffirm a state of facts, the accuracy of a Representation, the performance of a Covenant or the like. Bring Downs can also be sought from third parties, such as a Bring Down Certificate of Good Standing. | N1 |
| Bring Down Letter | a letter in which the writer or a party of an agreement confirms formally, that the content of documents or information disclosed, e.g., a stock exchange Prospectus or a Due Diligence report, is still correct from an objective point of view and not deceptive | N1 |
| Bring-down Certificate | Confirmation by the management of the4Target company to the effect that declarations already made – for example regarding warranties in the4Due Diligence Report or at4Signing – remain valid (e.g. at4 Closing). | N2 |
| Broadridge | the leading US provider of distribution services of Proxy Materials to Beneficial Owners, the largest tabulator of voting instructions by Beneficial Owners to their custodians, and the largest tabulator of Proxies cast by custodians | N1 |
| Broker | a term for a stockbroker who buys and sells shares on a stock exchange on behalf of clients. | N4 |
| Broker/Dealer | Individual or firm that acts as an intermediary between buyers and sellers, usually for payment of a commission. It may also buy securities to sell for a profit while fulfilling its role as dealer. | N6 |
| Bucket | another name for a Basket | N1 |
| Build-up Model | a model in which the expected return for a security (or portfolio of securities) is measured by a Risk-Free Rate plus premiums for Systematic Risk (e.g., Equity Risk Premium, size premium and industry risk premium) and Unsystematic Risk (e.g., Company-Specific Risk Premium). See also Capital Asset Pricing Model. | N7 |
| Bull | Individual who believes that a security, sector or the overall market is going to rise in price. Opposite of bear. | N6 |
| Bull Market | good times, until a Bear Market comes along | N1 |
| Bull Market | activity in the market is optimistic, and investors and dealers are likely to be buying, pushing prices up. | N5 |
| Bull Market | Period of sustained stock market growth. Opposite of bear market. | N6 |
| Bullet Loan | a loan that provides for payment of the entire principal at maturity (i.e., there is no Amortization prior to maturity) | N1 |
| Bullet Loan | In banking and finance, a bullet loan is a loan where a payment of the entire principal of the loan, and sometimes the principal and interest, is due at the end of the loan term. Likewise for bullet bond. A bullet loan can be a mortgage, bond, note or any other type of credit. The payment that is due at the end of the loan is referred to as the bullet payment or balloon payment. | N3 |
| Bullet Loan | a form of debt in which the interest payment and the debt redemption take place in full at the end of the loan. | N4 |
| Bullet Maturity | see Bullet Payment | N1 |
| Bullet Payment | when the entire principal of a Bond or Term Loan is due and payable on the maturity date (i.e., there is no Amortization prior to maturity). See also Bullet Maturity. | N1 |
| Bullet Portfolio | Bond portfolio with maturities concentrated over a small cross-section of the yield curve. | N6 |
| Bump | raising the price, or improving other terms, of an Acquisition Proposal | N1 |
| Burden Shift | a litigating term meaning that a trial judge has made a finding which has the effect of moving the burden of proof from one party to another | N1 |
| Burn Rate | a measure of the rate at which a start-up with little or no revenue uses available cash to cover expenses. | N5 |
| Business Angel | Person who invests in a company, often in the4Start-up Phase. A business angel – sometimes also referred to as an4Angel Investor – generally does not exert any direct influence on management of the company. In this respect business angels differ from venture capitalists (4Venture Capital Investor) and4Private Equity firms. | N2 |
| Business Angel | An angel investor or angel (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors invest online through equity crowdfunding or organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies. | N3 |
| Business Angels | investors who invest in a company at a very early stage. This type of investor is often an individual or a small group of individuals. | N4 |
| Business Angels | investors who invest in a company at a very early stage. This type of investor is often an individual or a small group of individuals. | N5 |
| Business Combination | a name for any type of transaction that results in the economic and legal Combination of businesses and assets of two or more entities, whether accomplished pursuant to operation of law (as in a Statutory Combination, Merger or Scheme), or by an Asset Acquisition or Acquisition of Securities of one entity of another | N1 |
| Business Combination Statute | another name for an Anti-Takeover Law | N1 |
| Business Cycle | An angel investor or angel (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors invest online through equity crowdfunding or organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies. | N3 |
| Business Cycle | See Economic Cycle. | N6 |
| Business Development | see Corporate Development | N1 |
| Business Judgement Rule (BJR) | Principle under which members of management are not personally liable if, at the time of taking the business decision, they had good reason to believe that they were acting on the basis of adequate information, free from conflicts of interest and for the benefit of the company (see section 93 (1) sentence 2 of the German Stock Corporation Act (AktG)). Managers are not held liable if these conditions are satisfied, even if in hindsight the decision proved to be disadvantageous (they therefore benefit from a “safe harbour”). This rule reflects the fact that business decisions invariably involve risk and that management is allowed to exercise judgement in running the business. | N2 |
| Business Judgment Rule | the default standard of judicial review of Board decisions under Delaware and almost all other US state corporation laws and, as applicable, certain national corporate laws. In its typical formulation as a procedural rule, the Business Judgment Rule means that, in reviewing a plaintiff’s claim that a Board of Directors breached its Fiduciary Duty to its shareholders, a court will presume that the Board acted in Good Faith, with due care and with loyalty to the company and its shareholders. The plaintiff ordinarily has the burden of proof of rebutting the presumptions inherent in the Business Judgment Rule. The related substantive formulation of the Business Judgment Rule is that a court will not second-guess a Board’s judgment unless the actions of the Board lack any rational basis. Similar reasonableness tests apply in other jurisdictions outside the US. | N1 |
| Business MAC | shorthand for the Condition Precedent in a Commitment Letter, Acquisition Agreement or Credit Agreement to confirm there has been no Material Adverse Change in the operations, business, or prospects of the Borrower or the Target Company. Sometimes called a Company MAC, this should not be confused with a Market MAC, which deals with Material Adverse Changes in market conditions. See also Material Adverse Change and Target MAC. | N1 |
| Business MAE | Business Material Adverse Effect. See Business MAC. | N1 |
| Business Plan | a detailed description of the plans of an existing business and its expansion plans or a new business, with financial projections. Also used to refer to the annual Business Plan which is often required to be delivered to Lenders under Credit Agreements for Leveraged Buyouts (effectively an update of the Base Case Model) | N1 |
| Business Plan | Summary of a business proposal, including objectives and strategies. A business plan must be submitted when a company applies for a loan, for example. The scope and type of information in the business plan are specific to each particular case. Factors include the sector, the size of the company and the purpose for which the business plan is used. | N2 |
| Business Plan | a document that defines and outlines exactly what the business does, what it wants to achieve and how it intends to do it. Business plans usually incorporate a financial forecast alongside strategic goals. Used widely by start-ups for raising finance. And by seasoned business owners looking to develop and grow their business. | N5 |
| Business Trust | a defined term under the Business Trusts Act (Cap. 31A) of Singapore | N1 |
| Butterfly Merger | another name for a Double Dummy Merger | N1 |
| Buy and Build | an investment made in a business with the intention of acquiring further “bolt-on” businesses in order to build the value of the original investment | N1 |
| Buy and Build | A strategy often used by Companies who are looking to grow through acquisition to create a valuable larger group. | N5 |
| Buy and Hold Analysis | Technique of investment performance measurement which compares a portfolio and its related characteristics (return, income, yield, volatility) at the end of a period with the portfolio as it would have been had no transactions occurred during the period. This separates the effects of market movements and manager decisions. | N6 |
| Buy and Hold Strategy | Investment strategy in which stocks are bought and then held for a long period of time regardless of short-term market movements. | N6 |
| Buy-Back | when former shareholders (usually founding shareholders) buy back the Equity Interests in a company held by a Private Equity Fund. See also Share Repurchase and Share Buyback. | N1 |
| Buyer | another name for an Acquirer, Bidder or Purchaser | N1 |
| Buyer’s Market | a market situation in which more potential Target Companies are for sale than potential Buyers exist. This situation leads to buying conditions more favorable for the Buyer. | N1 |
| Buy-In Management Buyout | an Acquisition of a company where Management of a company invests its own funds alongside a Private Equity Sponsor or other Investor in exchange for equity in the Surviving Entity of the transaction. See also BIMBO, Management Buyout and Going Private transaction. | N1 |
| Buy-Out | an Acquisition of a controlling interest in a company, generally by a Financial Buyer | N1 |
| Buy-out | Acquisition of a company or an equity stake in the form of a takeover financed by borrowing (4LBO) or a takeover by management (4MBO). | N2 |
| Buy-out Fund | See “private equity” | N3 |
| Buy-out Fund | see also private equity | N4 |
| Buy-out fund | see private equity. | N5 |
| Buy-Sell Agreement | a contract under which a shareholder must first offer his or her shares for sale to the other shareholders before being allowed to sell to outside entities. | N5 |
| Buy-Side | the side of the Buyer in the context of an Acquisition of a company or the Purchaser of Securities in capital market transactions | N1 |
| Buy-side | Buyer / purchaser side of a transaction. | N2 |
| Bylaws | together with the Charter, Bylaws usually make up the Constituent Documents of a corporation in many jurisdictions 1. (US) under the enabling policy of US state corporation laws, a company’s Bylaws may contain any number of permissive provisions dealing with the election and functioning of the Board of Directors, the content and conduct of Shareholders’ Meetings, the titles and job descriptions of senior executive officers, Indemnification of officers and directors, and other matters affecting the governance of the company. Unlike Articles of Incorporation, under most US state corporation statutes, directors and shareholders have co-extensive rights to adopt, amend, and rescind Bylaws without the approval of the other constituency. Accordingly, Bylaws are customarily viewed as being a more flexible tool for allocation of governance roles and responsibilities than Articles of Incorporation which require the concurrence of both the Board and shareholders for adoption, amendment or rescission. 2. (UK) called Articles of Association, they set out the constitutional rules by which the company is governed. This document must be registered at Companies House. Model articles are provided in UK Companies Act, although companies can adopt their own “Articles,” subject to relevant UK Companies Act provisions. 3. (DEU) called Articles of Association, they set out the regulations by which the company is governed 4. (ESP) rules governing the internal Management of an entity or organization which, in the case of business corporations, are drawn up at the time of incorporation 5. (FRA) the Constituent Documents of a corporation which contain a number of provisions dealing with the election and functioning of the corporation, the content and conduct of Shareholders’ Meetings, and description of the purpose of the corporation, of its Share Capital, of its location etc. The Bylaws of a French company may not be amended or rescinded without the prior approval of its shareholders. 6. (HKG) called Articles of Association, they set out the constitutional rules by which the company is governed. This document must be registered with the Hong Kong Companies Registry. Model articles are provided in the Hong Kong Companies Ordinance, although companies can adopt their own form, subject to relevant Companies Ordinance provisions. 7. (ITA) called statuto, are, in its initial form, attached to the Charter 8. (RUS) do not constitute Constituent Documents of a company and may not contradict the Charter or impose limitations which are not permitted to be envisaged in them; Bylaws regulate internal corporate matters, such as treatment of confidential information, powers and appointment of bodies. 9. (SAU) bylaws set out certain regulations by which a joint stock company is governed, together with the Commercial Registration Certificate and Articles of Association 10. (SGP) called Articles of Association, they set out the regulations by which the company is governed |
N1 |
| Beneficial Owner: generally, where equity allows the use and benefit of property to belong to a person even though legal title of the property belongs to another person 1. (US) Section 13(d) of the Exchange Act and related SEC Rules (most notably Rule 13d-3) cover the details of this concept. In short, if a person has the power to vote or dispose of a particular Security, either individually or as part of a Group or others Acting In Concert, then such person is the Beneficial Owner of that Security. 2. (UK) the Law of Property Act 1925 requires that the transfer of an equitable interest in property (including Shares) must be in writing. The Articles of Association of some UK companies restrict the transfer of only “beneficial ownership” (as compared to the transfer of full legal title, being legal and beneficial ownership). 3. (DEU) in general, the beneficial ownership is agreed between the shareholders of an entity and a third party. Section 39 of the general tax code (Abgabenordnung) covers the details of this concept for the tax assessment. Section 246 of the German Commercial Code (Handelsgesetzbuch) requires the Beneficial Owner of an asset to disclose such information in its Balance Sheet. 4. (ESP) as per Royal Decree 1066/2007, of July 27, on public Takeover Bids, refers to an individual or entity actually enjoying the benefits of ownership of a property with the power to vote or dispose of that particular asset. 5. (FRA) there is no direct French equivalent of the term Beneficial Owner as used in other jurisdictions. It may be used to describe persons Acting in Concert. 6. (HKG) Hong Kong law recognizes the concept of beneficial ownership of property; however, the Companies Ordinance provides that no notice of any trust shall be entered on the register of Members, and provides that the holder of Shares on the register is therefore the only person the company recognizes as having an interest in the relevant Shares. 7. (QAT) Law No.(25) of 2004 (the Proxy Law) prohibits certain “beneficial ownership” arrangements in situations where a Qatari may be seen as assisting a foreign shareholder to circumvent laws designed to limit a foreign Investor’s rights, such as special voting arrangements 8. (RUS) there is no direct Russian law equivalent of a Beneficial Owner as such term is used in UK law. The term “beneficiary” is used to describe a party that manages and can be entitled to the use of assets which are legally owned by another party. The notion of “Beneficial Owner” in its true sense is used in reference to persons who can exercise de facto control over the company pursuant to legal provisions of foreign jurisdictions. 9. (UAE) in order to minimize the effect of the local 51 percent shareholding requirement, in an LLC arrangement, conditions are often put in place to split the legal and beneficial ownership of the company. A foreign shareholder will often beneficially own more than 51 percent of the Shares of the LLC but legally will only hold a maximum of 49 percent. |
N1 |
Reference
N1: referring to The Book of Jargon – Global Mergers & Acquisitions, first edition, the Latham & Watkins, available at https://www.lw.com/admin/Upload/Documents/BoJ_Global_MandA-locked-March-2015.pdf.
N2: referring to Glossary of Key M&A and Corporate Terms, 4th edition, Dr Anne Meckbach and Dr Tobias Grau, available at https://cms.law/en/deu/publication/glossary-of-key-m-a-and-corporate-terms-2020.
N3：referring to M&A Dictionary, Global PMI Partners, available at https://gpmip.com/dictionary/.
N4：referring to M&A jargon demystified, KPMG, available at https://issuu.com/kpmg_be/docs/kpmg_m_a_vakjargon_en_digital.
N5: referring to Simple Guide to M&A Terminology and Jargon, Lucas & Weston Ltd., available at https://uploads-ssl.webflow.com/5708da760dd2dc033a78bd13/5b7ea45f3dbc72645fbee4b2_L%26W%20-%20M%26A%20Glossary.pdf.
N6：referring to INVESTMENT DICTIONARY, MARSH & McLENNAN COMPANIES, available at https://www.mercer.com/content/dam/mercer/attachments/europe/Netherlands/ic-dictionary-mercer.pdf.
N7: referring to International Valuation Glossary—Business Valuation, November 2021, jointly published by ASA, CBV Institute, RICS and TAQEEM, available at https://www.appraisers.org/docs/default-source/default-document-library/international-business-valuation-glossary_en_final.pdf?sfvrsn=e37c69d4_2.
The above information is collected from the Internet and reorganized for the purposes of learning and sharing only and not for any other purposes. It can not be guaranteed to be error-free.