| F |
| M&A Term | Definition | Note |
| face value | See nominal value. | N6 |
| Facility | Credit (line). | N2 |
| Facility | another name for loan or credit line | N1 |
| Fact Book | Description of a company used to provide information to potential investors, e.g. prior to an IPO, corporate action or M&A process. A fact book may include both general and specific corporate information, financial metrics, market analysis and descriptions of existing investment potential. | N2 |
| factor risk | Common trait that causes many securities to trade together. For example, country risk, sector risk, economic growth rate. | N6 |
| Factoring | The selling of trade debts (e.g. invoices) to a third party known as a Factor. Used by businesses to aid working capital. Commonly confused with Invoice Discounting. (see Invoice Discounting). | N5 |
| Factoring | As defined in section 1 (1a) no. 9 of the German Banking Act (KWG), the ongoing purchase of receivables on the basis of standard agreements (with or without recourse) by financial services institutions. | N2 |
| Fair Dealing | see Fiduciary Duty | N1 |
| Fair Disclosure | Describes the way in which a matter must be disclosed to the buyer in order that it can be deemed to be known, e.g. ensuring that documents in the data room are named and arranged correctly. Since the concept comes from Anglo-American law, particular emphasis should be placed on including a precise definition in the contract. | N2 |
| Fair Market Value | a Standard of Value considered to represent the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, each acting at arms-length in an open and unrestricted market, when neither is under compulsion to buy or to sell and when both have reasonable knowledge of relevant facts. See also Market Value | N7 |
| Fair Price Provision | a provision of a Company’s Charter or Bylaws that requires that shareholders receive a “fair price” for their equity in a sale of the Target Company, usually defined as a required premium over market or a required premium over a prior Bid price. The purpose of most Fair Price Provisions is to make it too costly for a Buyer to engage in a Two Step Acquisition in which the first step is a Hostile Tender Offer or large Open Market Accumulation program, by requiring the Buyer to pay so much more to acquire the remaining public ownership of the Target Company’s Stock that the Second-Step in the Acquisition will not make economic sense. | N1 |
| Fair Price Statute | US state law statute equivalents to Fair Price Provisions | N1 |
| fair value | Price deemed to accurately reflect the price of a security, based on measurable valuation fundamentals. Considered to be an equitable valuation from the points of view of both buyer and seller. Removes the potential for a market participant making risk-free profits from arbitrage. | N6 |
| Fair Value | a Standard of Value for which there are different definitions, depending on the context and purpose. Fair Value is typically defined or imposed by a third party (e.g., by law, regulation, contract, or financial reporting standard-setting bodies). The most commonly used definition for financial reporting purposes is under IFRS and US GAAP, which define Fair Value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date | N7 |
| Fair Value Provision | another name for a Fair Price Provision | N1 |
| Fair Value Statute | another name for a Fair Price Statute | N1 |
| Fair Value Statute | a letter or similar document from a Financial Advisor to its client, or to the Board of Directors of its client, expressing the Financial Advisor’s opinion with respect to the fairness, from a financial point of view, of a proposed Acquisition (if given to the Buyer’s Board of Directors) or the Merger Consideration to be paid to the Target’s stockholders (if given to the Target’s Board of Directors). Fairness Opinions are typically very stylized and not subject to significant negotiation. The function of a Fairness Opinion is usually to support a Board of Directors in its exercise of its Duty of Care. As such, Fairness Options are most often obtained by publicly held companies. The practice of obtaining Fairness Opinions, particularly for the Board of Directors of a publicly held Target Company, is routine in the US and gradually becoming more common in non-US M&A transactions. 1. (US) Fairness Opinions became ubiquitous for Public Company Sellers in the US in the mid-1980s after the Delaware Supreme Court noted that a Board, which the court held had not fulfilled its Duty of Care in approving a Merger, had not retained an Investment Banker to advise the Board with respect to the Merger. Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985). 2. (HKG and SGP) see IFA Opinion | N1 |
| Fairness opinion | the additional opinion of an independent expert on the value of a company or the assumptions used as a basis for the value. An expert can assess whether the transaction terms and conditions, especially the price, correspond with the underlying value of the company, and writes a report on this | N4 |
| Fairness opinion | A fairness opinion is a professional evaluation by an investment bank or other third party as to whether the terms of a merger, acquisition, buyback, spin-off, or privatization are fair. It is rendered for a fee. They are typically issued when a public company is being sold, merged or divested of all or a substantial division of their business. They can also be required in private transactions not involving a company that is traded on a public exchange, as well as in circumstances other than mergers, such as a corporation exchanging debt for equity. Some of the specific functions of a fairness opinion are to aid in decision-making, mitigate risk, and enhance communication. |
N3 |
| Fairness Opinion | Report by an independent expert as to whether the provisions negotiated by the parties (in particular the purchase price) are fair from a financial point of view; this enables the boards of the contracting parties to protect themselves in law and document the fact that they entered into the transaction on appropriate terms. A fairness opinion can also help to dispel any concerns felt by shareholders if their willingness to sell is crucial to the transaction. | N2 |
| Fairness Opinion | an opinion as to whether the consideration proposed to be paid or received in a transaction is fair from a financial point of view to the party paying or receiving such consideration. | N7 |
| fallen angel | Highly rated investment grade bond that falls (or is downgraded/re-rated) below investment grade. | N6 |
| Family Office | A platform used for managing private wealth via a family-owned entity or external service provider. | N2 |
| Family, friends and fools | Many first-time entrepreneurs find themselves unable to fund their startups at the venture capital level or even with angel investors. Their only recourse is that first tier of investors, fondly called “family, friends and fools”. These are the only people likely to believe in newbies, with only minimal product evidence or business experience | N3 |
| FAS87 | See Financial Accounting Standard 87 | N6 |
| Fat lady | during negotiations there are frequent warnings about premature optimism about the success of the transaction. “It isn’t over until the fat lady sings” refers to the fact that the transaction is not complete until the final agreement is signed | N4 |
| FCA | shorthand for the UK Financial Conduct Authority | N1 |
| FCPA | acronym for Foreign Corrupt Practices Act | N1 |
| FCPA (Clause) | Foreign Corrupt Practices Act of 1977; a US law for combating corruption. An FCPA clause may include a warranty to the effect that the provisions of the FCPA have not been breached, for example, or that no such breach is known. Declarations of this nature are often part of a group-wide Compliance programme. | N2 |
| Federal Antimonopoly Service | a Russian state authority exercising control over competition in the Russian market; parties may need to obtain the prior approval of or notify the Federal Antimonopoly Service of a Merger or an Acquisition. See Competition Commission. | N1 |
| Federal funds rate | Interest rate at which the Federal Reserve (the US Central Bank) lends funds from depository banks with excess reserves to depository banks seeking additional reserves overnight. Manipulation of the federal funds rate is the principal instrument for managing monetary policy in the US. Also known as fed funds rate. | N6 |
| Federal Trade Commission | an agency of the US government with primary responsibility for consumer protection and co-extensive responsibility with the Antitrust Division of the Department of Justice for antitrust oversight. As such, the FTC shares responsibility with the Antitrust Division for reviewing Acquisitions for potential Anti-Competitive implications under the Hart-Scott-Rodino Act. See Competition Commission. | N1 |
| Fee Letter | Fee agreement; often in connection with instructing M&A advisors. | N2 |
| Fee Letter | the part of the Commitment Papers package that sets forth the fees and contains the market flex provisions. The Fee Letter is a separate letter which outlines certain fees to be paid in connection with the various Credit Facilities contemplated by the Commitment Letter. Note that the Fee Letter is often not shared with the Target Company (among others). Always be careful as to whom this letter is distributed. | N1 |
| Fees | the fee of the deal advisor. These are often split into an up-front retainer followed by a successful commission payment, usually percentage based. The fees of other advisors are usually time and expense based. | N5 |
| Fees | the fee of the deal advisor generally consists of two parts, specifically the retainer and the success fee. The fees of other advisors are usually time and expense based. | N4 |
| FFF | Family, Friends and Fools. Financing form for young start-ups by means of loans (subordinated or otherwise) from friends, acquaintances, or family members | N4 |
| fiduciary | Person or entity that acts for the benefit and on behalf of another person or group of persons. A fiduciary holds a legally enforceable position of trust. | N6 |
| Fiduciary | a party which has a duty to act solely in the interests of another party. Officers and directors of a corporation/company serve as fiduciaries for the corporation’s stockholders/company shareholders and are charged with serving in their best interests. | N1 |
| Fiduciary Duty | see Fiduciary. See also, e.g., Duty of Candor, Duty of Care, Duty of Loyalty and Directors’ Duties. | N1 |
| Fiduciary Out | If the management board of a listed company has undertaken to recommend that shareholders accept an acquisition offer, a fiduciary out clause allows the board to walk away if a third party submits an offer that is better for the shareholders or if circumstances subsequently become known that have a positive impact on the value of the company (Gold in the Backyard), depending on the exact drafting of the clause. Fiduciary out provisions are often accompanied by a No-shop Clause and / or No-talk Clause. | N2 |
| Fiduciary Out | a provision in an Acquisition Agreement that allows the Board of Directors to terminate the agreement if a “better” deal arises with another party. Almost universally found in No Shop provisions in a Public Company Acquisition Agreements which permit the Target Company (notwithstanding the No Shop provisions) to provide information to and negotiate with a Competing Bidder upon certain determinations made by the Target Company’s Board of Directors, including that the proposed Acquisition terms from the competing third party Bidder are or are reasonably likely to become a Superior Proposal. | N1 |
| Fight Letter | a type of Proxy solicitation material, often in the form of a letter to shareholders, which is typically far shorter and punchier than a formal Proxy Statement in a Proxy Contest. Fight Letters, like political ads, seek to persuade the shareholders to vote in the manner proposed by the author. | N1 |
| Fill-Up Rights | when used to describe the consequences of hitting a Downside Collar in a fixed exchange rate deal, means the Bidder has the right (but not the obligation) to change the Exchange Ratio so as to make up for some or all of the loss in market value of the Bidder’s Stock. If the Bidder fails to do so, the Target Company would typically have the choice of living with the Fixed Exchange Ratio or terminating the transaction. The new Exchange Ratio could also be subject to a Collar. A variation permits the Bidder to compensate the Target shareholders for some or all of the putative loss in value with cash consideration. | N1 |
| Final Bid / Final Offer | Particularly in the context of an Auction Process, bidders submit an offer to reach the next round of negotiations. The seller uses this to decide which bidder(s) to move forward with. The final bid is not usually structured as a legally binding offer, even though the name implies this. Apart from other considerations, in many cases the (notarial) form requirements are not met (see also Binding Bid / Binding Offer). | N2 |
| Financial Accounting Standard 87 (FAS87) | US accounting standard which sets out the accounting treatment of retirement benefits such as pensions. | N6 |
| Financial Adviser | see Financial Advisor | N1 |
| Financial Advisor | is typically an Investment Bank acting as an independent contractor that provides advice to a participant in a transaction. A Financial Advisor sometimes, but not always, provides the Board of its client with a Fairness Opinion. Also customarily, though not obligatory, a Financial Advisor prepares presentations for the client’s senior Management and/or Board (in which case the financial analysis is often called a Board Book) focusing on the financial aspects of a transaction. Sometimes spelled Financial Adviser. | N1 |
| Financial assistance | this term refers to Section 629 of the Belgian Company Code, which states: “A public limited company cannot advance any funds, nor permit loans or provide security with a view to the acquiring of its shares or profit-sharing certificates by third parties….” This ban was lifted as of 1 January 2009, and «financial aid» or «financial assistance» is now possible under certain conditions. | N4 |
| Financial Assistance | rule prohibiting or restricting the grant by a company of assistance (whether in the form of a loan, a grant, or a guarantee or Security) for the Acquisition or subscription of its own Shares 1. (UK) introduced in jurisdictions throughout the European Community by the Second Council Directive of 13 December 1976 (77/91/EEC), but in varying shades depending on the applicable legal regime, and in particular whether the jurisdiction has a strong Corporate Benefit requirement. Since 1 October 2009 in England and Wales, a Private Company is allowed to provide Financial Assistance other than to support the purchase of Shares in a public Parent company, and no Financial Assistance may be given by public companies save for limited exceptions. However, not every other European country is as generous, and the Financial Assistance rules should be carefully considered before committing to provide secured debt in European financings, as these rules can severely limit (or prevent) the ability to get collateral and guarantees. See also Corporate Benefit. 2. (ESP) introduced in jurisdictions throughout the European Community by the Second Council Directive of 13 December 1976. Financial Assistance in Spanish law refers to assistance given by a company for the purchase of its own Shares or the Shares of its holding companies. In many jurisdictions such assistance is prohibited or restricted by law. In Spain a company cannot anticipate funds, provide loans, provide guaranties or give any kind of Financial Assistance for the Acquisition of the own Shares of the company or any kind of Shares of any other company of the same group (Article 150 of the Spanish Companies Act). A Limited Liability Company cannot anticipate funds, provide loans, provide guaranties or give any kind of Financial Assistance for the Acquisition of the own Shares of the company (Article 143 of the Spanish Companies Act). 3. (FRA) Article L. 225-216 of the French Commercial Code provides that a French company shall not advance funds, grant loans or give Security for the purpose of the subscription or the Acquisition of its own Shares by a third party. A breach of such Article constitutes a criminal offence and may lead to the invalidity of the operation concerned. See Guarantee Limitation Language. 4. (HKG) under the Hong Kong Companies Ordinance, a company or its subsidiaries is, subject to certain exceptions, prohibited from giving Financial Assistance directly or indirectly for the purpose of an acquisition of its own Shares, whether the assistance is given before, after or at the same time as the acquisition. Under the new Companies Ordinance (coming into effect from 2014), exceptions will be introduced which will broaden the circumstances under which Financial Assistance will be permitted. 5. (ITA) Article 2358 of the Italian Civil Code, implementing the European directive mentioned above, provides that a company cannot grant loans or guarantees for the purchase or subscription of its own Shares unless certain conditions are met (i.e., among other things, a Whitewash by a general Shareholders’ Meeting shall be obtained). 6. (SGP) Section 76 of the Companies Act of Singapore prohibits (save for certain exceptions) a company from giving Financial Assistance to any person whether directly or indirectly for the purpose of the Acquisition or proposed Acquisition of: (i) Shares in the company or units of such Shares; or (ii) Shares in its Holding Company or units of such Shares. 7. (UAE) there are no Financial Assistance provisions in UAE legislation, but there is a proposal to introduce it for Public Companies. |
N1 |
| Financial buyer | a company buying for purely financial, as opposed to synergy reasons, typically private equity companies | N3 |
| Financial Buyer | generally, a Sponsor which is acquiring a business or Target Company as an investment rather than to achieve Strategic Synergies. Compare Strategic Buyer. | N1 |
| Financial Conduct Authority | in 2013 the FCA became responsible for regulation of conduct in UK retail, wholesale and financial markets, and the infrastructure that supports those markets. See also Financial Services Authority and Prudential Regulation Authority. | N1 |
| Financial Conduct Authority (FCA) | Independent body formed as one of the successors to the Financial Services Authority (FSA), focusing on the regulation of conduct by the financial services industry in the UK. | N6 |
| Financial Covenants | Commitment given by the borrower to the lender that the borrower will comply with certain financial metrics stipulated in the loan agreement. Breaching these metrics often gives rise to a right of cancellation on the part of the lender. | N2 |
| Financial Covenants | provisions in a loan agreement according to which the Borrower is obligated to maintain or fulfill specific financial target settings during the duration of the loan | N1 |
| Financial Debt | Debt incurred in financing a company. | N2 |
| Financial due diligence | the process of reviewing the historical and future accounts and forecasts of the company. Typically undertaken by the purchaser’s accountants or advisers. | N5 |
| Financial due diligence | the review of the historical and future figures of the company. The focus in this context is often on the quality of earnings (how robust are the historical results?), the quality of net debt (which items could all be taken into consideration in determining the net financial debt? – see also debt and cash free–, the forecast (analysis of the budgets and future projections) and the normalized working capital | N4 |
| Financial due diligence | “A Financial Due Diligence is both a forward looking, and a historical review of the target’s figures. Typical areas under review are: – the quality of earnings – the nature and definition of net debt – normalisation of one-time and exceptional items – the elements and seasonality of working capital” | N3 |
| Financial Due Diligence | Assessment of key valuation parameters and identification of financial risks in the Target’s business, usually carried out by auditors; the focus is normally on earnings, Cash Flow, liquidity and capital adequacy. | N2 |
| Financial Investor | Unlike a Strategic Investor, financial investors engage in transactions primarily for investment purposes. They aim to make a capital gain from a subsequent Exit, typically within a few years. Financial investors are often private equity funds, Hedge Funds, venture capital funds or banks. | N2 |
| Financial Reporting Standard 17 (FRS17) | UK accounting standard which sets out the accounting treatment of retirement benefits such as pensions and medical care during retirement. It has replaced SSAP24. | N6 |
| Financial Services Authority | the former regulator for the UK financial services industry, given statutory powers by the Financial Services and Markets Act 2000. The Financial Services Authority’s statutory objectives were to maintain market confidence and financial stability, promote public awareness, protect consumers and reduce financial crime. Anyone carrying out a Regulated Activity in the UK had to be authorized by the Financial Services Authority or able to rely on an exemption. In 2013, the FSA was replaced by two new regulatory bodies; (i) the Prudential Regulation Authority (PRA) became the UK’s prudential regulator for deposit-takers, insurers and designated investment firms; and (ii) the Financial Conduct Authority became responsible for regulation of conduct in retail, as well as wholesale and financial markets and the infrastructure that supports those markets. | N1 |
| Financial Statements | (see Statutory Accounts) The annual statement summarising a company’s activity during a set accounting period (usually a financial year). | N5 |
| Financial Statements | Annual or interim financial statements published by a company. | N2 |
| Financial Statements | the Income Statement, Balance Sheet and Cash Flow Statement of a company | N1 |
| Financing Commitment | usually refers to a binding agreement from a financing source to provide Debt Financing for an Acquisition transaction on specified terms (usually contained in an extensive Term Sheet) subject to the drafting and negotiation of a definitive loan agreement. Financing Commitments are usually obtained from a commercial or Investment Bank or banks, but are sometimes provided by other types of Lenders, including Hedge Funds or entities specializing in providing acquisition financing. See also Commitment Letter. | N1 |
| Financing Condition | a Condition Precedent in the Acquisition Agreement that makes Buyer’s obligation to consummate the Acquisition subject to Buyer’s obtaining sufficient financing to complete the transaction. Also called a Financing Out. The consequence of a Financing Out is that the Buyer does not have to consummate the Acquisition even where the Buyer has obtained Financing Commitments, if those commitments (as set forth in the Commitment Letter) do not fund. The Financing Out is a big deal and is hugely important to the overall structure of even a financed Acquisition because a Financing Out effectively incorporates into the Acquisition Agreement all the Conditions Precedent in the Commitment Letter. Without a Financing Out, the Buyer will usually negotiate with its Financing Sources to limit or eliminate Conditions Precedent in the Commitment Letter because the Buyer is contractually obligated to consummate the Acquisition whether or not the financing is still available on the Closing Date. Financing Conditions are found principally in LBO transactions. They are a rarity in Strategic Acquisitions unless the Buyer is using significant indebtedness to finance the Acquisition. 1. (UK) Financing Conditions are not typical in UK transactions. |
N1 |
| Financing Facility | a definitive agreement (or related agreements) to provide debt or equity funding | N1 |
| Financing Out | This type of provision enables the buyer to withdraw from the contract if it fails to secure the funding needed to pay the purchase price. | N2 |
| Financing Out | another name for a Financing Condition | N1 |
| Financing Sources | a generic term for banks and other providers of Debt Financing for Acquisitions | N1 |
| Finding | Identification of a risk in the course of Due Diligence. | N2 |
| Firm Commitment Underwriting | Hard Underwriting. | N2 |
| Firm Offer Announcement | used in the context of Hong Kong public Takeovers and shorthand for the announcement required by Rule 3.5 of the HK Takeovers Code of a firm intention to make a Takeover Offer | N1 |
| First Demand Guarantee | Guarantee whereby the objection that a guaranteed claim is not legally due does not exclude an obligation to pay; the objection is not dealt with until after payment, in a claim for damages. A Standby Letter of Credit is comparable in terms of function (see also Guarantee on First Demand). | N2 |
| First Dollar / First Euro | Provision in a sale and purchase agreement typically relating to warranty claims which stipulates that if an agreed Threshold is exceeded the whole amount may be claimed, i.e. not only the amount above the threshold. If only the claim that exceeds the threshold is payable, the term Deductible is used. As with a De Minimis provision, this rule is aimed at preventing the parties from making minor claims and thus encourages a more constructive relationship (see also Basket). | N2 |
| First Round | an initial round of Bid solicitations serving to determine the most interested potential Bidders for a Target Company or business. Often certain information will be withheld from potential Bidders until the field is narrowed to a select few contenders. | N1 |
| First Step Acquisition | another name for a Front-End Transaction | N1 |
| fiscal policy | Collective term for decisions made by a government in relation to tax and spending. It is a tool by which a government influences its economy. Typically, spending will exceed income (taxation) when a government is trying to stimulate the economy, and vice versa when it is trying to temper inflationary growth. | N6 |
| Fiscal year | a period that a company or government uses for accounting purposes and preparing financial statements. The fiscal year may or may not be the same as a calendar year. In the UK it runs from April 6th to April 5th the following year. | N5 |
| Fitch Ratings | Independent rating agency that assesses the creditworthiness of companies and their debt. The highest rating awarded is AAA, and the lowest is D. Other wellknown agencies are Standard & Poor’s and Moody’s. | N6 |
| Fixed assets | assets purchased for long-term use (to produce income for the business) and are not likely to be converted quickly into cash, such as land, buildings, and equipment. | N5 |
| Fixed Assets | Tangible fixed assets, e.g. property, plant and equipment (see also section 266 (2) A. II. 1.–4. of the HGB (German Commercial Code)). Care is needed in the context of contractual definitions of the term, since “fixed assets” do not necessarily coincide with German “Sachanlagen” as per the HGB. | N2 |
| Fixed Charge | a charge taken under English law over a particular asset giving the chargee control over any dealings with that asset. A Fixed Charge is often taken as Security and is distinct from a Floating Charge as the asset charged does not change if Stock levels etc. change. A Fixed Charge ranks ahead of a Floating Charge in the order of repayment in Insolvency. 1. (HKG) a similar concept exists under Hong Kong law |
N1 |
| Fixed Exchange Ratio | an Exchange Ratio that does not vary depending on changes in market value of the Buyer’s Stock. One way to analyze a Fixed Exchange Ratio is as an allocation of the risk of changes in market value of the Buyer’s Stock between signing of an Acquisition Agreement and Closing by assigning to the Buyer’s the “risk” of a price increase between signing and consummation, and assigning to the Target Company shareholders the reciprocal “risk” of a price decline between signing and Closing. An alternative analysis views a Fixed Exchange Ratio as an expression of the relative value of the two companies at the time of signing the Acquisition Agreement, a valuation which presumptively does not change merely because the market price of the Buyer’s Stock (which may take into account the value of the Acquisition of the Target Company) changes during the interval between signing and Closing. | N1 |
| fixed interest asset | Asset where the timing and amount of future interest or coupons are specified (and fixed) at the time of issue. (See also real asset.) | N6 |
| Fixed Value Exchange Ratio | another name for a Floating Exchange Ratio | N1 |
| flat yield curve | Where short, medium and long maturity bonds in the market all have similar yields. | N6 |
| flight to quality | Passage of funds from riskier to safer investments during periods of market uncertainty — for example, investors seeking government rather than corporate bonds. Can also refer to foreign investors withdrawing capital from a country during times of political or currency instability. | N6 |
| Flip-In | a provision in a Poison Pill that grants Rights Holders the right to acquire additional Shares of the Target Company at a steep discount to market (customarily 50 percent) upon a Hostile Bidder acquiring Shares of the Target Company in excess of a specified Pill Trigger 1. (FRA) made in France via the issuance of Warrants which gives the right to acquire additional Shares of the company at a steep discount. Such issuance requires the prior approval of the shareholders. | N1 |
| Flip-Over | as opposed to a Flip-In, this provision in a Poison Pill permits Rights Holders the right to acquire a specified number of Shares of the Bidder at a steep discount to market (customarily 50 percent) if the Target Company is acquired in a Merger following the triggering of a Pill. The Flip-In provision has never been utilized because no Bidder has ever triggered a Pill and persevered to complete an Acquisition of the Target Company. | N1 |
| Floating Charge | a charge taken under English law over all the assets or a class of assets owned by a company from time to time. The charge “floats” over the assets and allows the chargor to continue to deal with the assets in the Ordinary Course of Business until Crystallization. A Floating Charge ranks behind a Fixed Charge in the order of repayment in Insolvency. 1. (HKG) a similar concept exists under Hong Kong law | N1 |
| Floating Exchange Ratio | an Exchange Ratio that varies depending on the price of the Buyer’s Stock, usually expressed as the number of Shares of Buyer’s Stock which, when divided by the market price of the Stock (usually averaged over a measurement period ranging from a few days to as many as 30), produces an agreed dollar amount. Since the point of a Floating Exchange Ratio is to deliver an agreed market value to the Target Company’s shareholders, the measurement period is usually set just prior to the Closing Date. In a Floating Exchange Ratio, the Buyer assumes the risk of a decline in its Stock price between signing and Closing (in which case it will have to issue more Shares than it would have had to at signing) and the Target Company shareholders assume the risk of a rise in the Buyer’s Stock price between signing and Closing (because, unlike under a Fixed Exchange Ratio, they will not receive any market appreciation due to a rise in price of the Buyer’s Shares). | N1 |
| floating rate bond/floating rate note (FRN) | Bond with a variable coupon rate, periodically reset based on some predetermined benchmark interest rate. Floating rate bonds are generally issued by banks or companies whose earnings are closely tied to interest rate fluctuations as a way of more closely matching interest payments to earnings. | N6 |
| floor | Interest rate contract where the purchaser receives from the seller, at the end of each period prior to expiry of the contract, the difference between the strike interest rate and current interest rate, should the interest rate fall below the strike. For example, agreement to receive money for each month during which LIBOR is less than 4%. (See also cap.) | N6 |
| flotation | First issue of shares by a company on a stock exchange. (See also initial public offering.) | N6 |
| Flotation | when a company initially trades its Shares on the public market. See Initial Public Offering. | N1 |
| Follow-On Offering | an offering of common Shares subsequent to the Initial Public Offering | N1 |
| Football Field | the bar graph depiction of a range of implied valuations for a company based on different methodologies, such as Discounted Cash Flow, Comparable Company Analysis and/or Comparable Acquisition Analysis. Typically the Football Field is included in the Banker Book or Board Book. | N1 |
| Footsie: | slang term for the FTSE 100 index of the LSE’s leading Shares by market capitalization | N1 |
| Force the Vote Provision | a provision in an Acquisition Agreement that precludes termination of the agreement prior to a Target Company shareholder vote, even if the Target Company has received a Superior Proposal, is entitled to a Change in Board Recommendation and encourages shareholders to vote against the original Acquisition Agreement. Force the Vote Provisions are very favorable to an incumbent Bidder faced with a Competing Bid because of the timing advantage it confers on the incumbent Bidder and the uncertainty as to whether, if the shareholders vote down the Acquisition Agreement, the Competing Bidder and the Target Company will in fact execute an Acquisition Agreement meeting the terms of the Superior Proposal. By the same token, Target Companies strenuously resist Force the Vote Provisions. | N1 |
| Forced Liquidation Value | a form of Liquidation Value in which an asset or assets are presumed to be sold with less than a reasonable period of market exposure. Contrast with Orderly Liquidation Value | N7 |
| Foreign Corrupt Practices Act | the United States Foreign Corrupt Practices Act of 1977 that sets out federal law in relation to, among other things, bribery of foreign officials | N1 |
| Foreign Investment Law (Qatar) | refers to Law No.(13) of 2000 which, among other things, sets the limit on foreign ownership of Qatari companies up to a maximum of 51 percent of the company’s Share Capital (with the exception of a number of sectors which may permit 100 percent ownership). See also Foreign Investment Rules. | N1 |
| Foreign Investment Rules | 1. (US) see CFIUS and Exon-Florio 2. (DEU) see German Foreign Trade Law and Regulations (Aussenwirtschaftsgesetz, Aussenwirtschaftsverordnung) 3. (FRA) under French Law, the prior approval of the French Ministry of Economy may be requested when foreign Non-EU or EU Investors intend to acquire French companies operating certain Strategic and sensitive businesses (e.g., gambling sector, the pharmaceutical and biotech sector, national defense, etc.) 4. (RUS) there are two main acts regulating foreign investment in Russia, including Federal Law No. 160-FZ “On Foreign Investment in the Russian Federation” dated 9 July 1999 and Federal Law No. 57-FZ “On the Procedure for Foreign Investment in Commercial Organizations of Strategic Importance for the National Security of the Russian Federation” (the Foreign Investment in Strategic Enterprises Law) dated 29 April 2008 5. (QAT) see Foreign Investment Law (Qatar) 6. (UAE) see Foreign Ownership Restrictions (UAE) |
N1 |
| Foreign Ownership Restrictions (UAE) | Article 22 of the UAE Companies Act sets out that every company incorporated in the UAE must have one or more national partners whose Share in the company capital must not be less than 51 percent of the company capital. GCC nationals will be treated as UAE nationals so long as the LLC in question is 100 percent owned by GCC nationals and/or UAE nationals. Public joint stock companies need to be 100 percent owned by UAE nationals. In addition, certain activities are restricted to corporate entities 100 percent owned by UAE nationals, including oil exploration, drilling, production and related activities and ownership of real estate (outside of Designated Areas). See also Foreign Investment Rules. | N1 |
| forex | Common abbreviation for “foreign exchange”. | N6 |
| Form S-4 | the type of SEC Registration Statement, pursuant to which new Securities are registered and offered to stockholders of a Target Company in an Acquisition which all or part of the consideration is in the form of Buyer Stock or other Securities. The Form S-4 almost always consists of a few additional pages of required information (called a “Wrap Around”) that is combined with the Target Company’s Proxy Statement to its shareholders to vote upon the proposed deal. | N1 |
| Formal Sale Process | see Auction 1. (UK) the announcement by a UK Public Company soliciting interest from potential Bidders, which may result in certain dispensations being given by the UK Takeover Panel as a result of the Target Board initiated effort to sell the company |
N1 |
| forward contract | Contract to buy or sell an asset at an agreed price at a specified date in the future. Forwards are similar to futures but are not exchange traded and need not be standardised. | N6 |
| forward exchange rate | Exchange rate fixed today for the purchase or sale of a currency at a specified future date. It is calculated on the basis of a spot exchange rate and the interest rate differential between the two relevant countries. | N6 |
| forward interest rate | Interest rate fixed now on a loan that will occur at a specified future date. | N6 |
| Forward Merger | another name for a Forward Subsidiary Merger or Forward Triangular Merger | N1 |
| forward rate agreement (FRA) | Form of a forward contract between two parties to exchange an interest rate differential on a notional principal amount at a given future date. Settlement is through payment of the net differential only. A swap is a combination of FRAs. | N6 |
| forward rate option | Contract giving the buyer the right, but not the obligation, to exchange an interest rate differential on a notional principal amount at a given future date. | N6 |
| Forward Subsidiary Merger | a Triangular Merger in which the Target Company is merged with and into a subsidiary (usually a wholly-owned subsidiary created for this purpose) of the Buyer and the subsidiary is the surviving company in the Merger. Forward Subsidiary Mergers are usually not favored because they may complicate record ownership of real and certain personal property and because they may raise issues as to assignability of certain contracts without consent of the counterparty. Also referred to as a Forward Merger or Forward Triangular Merger. | N1 |
| Forward Triangular Merger | another name for a Forward Merger or Forward Subsidiary Merger | N1 |
| Fractional Shares | like the name suggests, a fractional Share is less than a full Share of Stock. Unless otherwise indicated by the entity’s organizational documents, a fractional Share will generally convey a fraction of the economic and voting rights of a full Share. Fractional Shares occur in every instance where an Exchange Ratio is not expressed in whole numbers. However, most Acquisition Agreements provide that Fractional Shares will not be issued. In lieu thereof, the Agreement may either provide a mechanism for buying or selling Fractional Shares among Target Company shareholders or, more commonly, for a cash payment by the Bidder instead of the issuance of a Fractional Share. | N1 |
| Framework Agreement | Master agreement containing general provisions which are intended to apply to more than one individual agreement. This type of agreement also defines a structure for the individual steps in the transaction and links them accordingly. | N2 |
| Framework Agreement | a skeleton agreement which comprises provisions that should apply to several contemporaneous or subsequently concluded agreements | N1 |
| Franchise | once the threshold has been reached, the amount of the loss in excess of the threshold will be compensated. This means that the threshold is similar to the franchise In an insurance policy | N4 |
| Franchise Tax | a tax charged in certain jurisdictions (e.g., US states) to corporations which are incorporated in or otherwise have filing obligations in those jurisdictions | N1 |
| Free Cash Flow | deducting the tax on the operating profit, investments and growth in working capital from the EBITDA indicates the free cash flow | N5 |
| Free Cash Flow | deducting the tax on the operating profit, investments and growth in working capital from the EBITDA provides an indication of the free cash flow | N4 |
| Free cash flow | The EBITDA, excluding cash elements like investments, changes in working capital, and taxes on operating profit | N3 |
| Free Cash Flow | the net operating cash a company generates during a period after deducting all cash costs of doing business (including payment of taxes and Capital Expenditures). A popular measure for a company’s ability to create value. Free Cash Flow is not normally presented on an Accrual basis, is not a GAAP concept and is often modified (and given a different name) to better match a particular industry’s business Model. | N1 |
| Free Float | the percentage of a company’s shares that is freely tradable on the stock exchange | N4 |
| Free Float | Shares held by small shareholders | N2 |
| Free Float | see Public Float | N1 |
| Free Zone | various Free Zones have been set up in the UAE. Free Zones are Designated Areas set up with a business friendly environment to encourage development, investment or for some other reason. Free Zones are subject to their own laws and, in the case of the DIFC, have their own court system. In general, federal UAE laws will apply to Free Zones where they are not contradictory to the law of a relevant Free Zone. | N1 |
| free-standing additional voluntary contributions (FSAVC) | Contributions paid by individuals into investment vehicles administered independently of their occupational pension scheme. Accrue benefits on a money purchase basis. (See also additional voluntary contributions.) | N6 |
| Freeze Out Provision | a generic name for a provision in a Charter that sets special rules for a Buyer of a controlling stake in the company to acquire the balance of the public’s Equity Interest in the company | N1 |
| Friendly | see Friendly Takeover | N1 |
| Friendly mergers | Mergers and acquisitions resulting from negotiations, with the willing consent of the acquiree company. | N3 |
| Friendly Takeover | a consensual Acquisition (as opposed to Hostile or Unsolicited Takeover), one which is not opposed by the Target Company. Friendly Acquisitions range from ones the Target Company actively solicited or supported to those to which a Target Company grudgingly acquiesced. Likewise, the adjective Friendly is used to describe Bidders in consensual transactions. 1. (UK) often called a “Recommended Takeover” 2. (HKG) more commonly known as an Agreed Takeover |
N1 |
| FRN | See floating rate bond/floating rate note. | N6 |
| front office | Dealing, research and marketing activity of an investment management company. (See also back office.) | N6 |
| front running | Illegal practice in which a bank, aware of a large order, executes a trade in the market prior to the release of the order to profit from an anticipated favourable price move. | N6 |
| Front Running | Front running refers to a situation where a securities trading firm executes an order on its own behalf shortly before carrying out a client order (see also Scalping). | N2 |
| front-end load | Initial payment, in the form of commission, paid to an intermediary or manager upon purchase of a security or unit in a pooled fund. (See also no-load.) | N6 |
| Front-End Transaction | the first step in a Two Step Acquisition, usually a Tender Offer or Exchange Offer, but sometimes an Open Market Accumulation | N1 |
| FRS17 | See Financial Reporting Standard 17 | N6 |
| Frustrating Action | 1. (UK) in the context of a UK Takeover, a Frustrating Action is action outside of the Ordinary Course of Business which a Target Company takes to defend itself from an Offer or potential Offer. Unless a majority of the Target Company’s shareholders, or all other parties in the Offer process consent, the action is prohibited by Rule 21 of the UK Takeover Code. Contrast with the rules on Poison Pill. 2. (ESP) in the context of a Spanish Takeover, this is action outside of the Ordinary Course of Business which a Target Company takes to defend itself from an Offer or potential Offer. Generally a Frustrating Action is forbidden under the Spanish Takeover regulation as a passivity rule is imposed on a Target’s Management body. 3. (FRA) under French Law, in the course of an Offer, the Board may not take any actions to prevent the Offer from succeeding without the prior approval of the shareholders. Authorizations and delegations granted by the shareholders to the Board before the date of the Offer will be suspended for the time of the Offer. 4. (HKG) in the context of a Hong Kong Takeover, once a Bona Fide Offer has been communicated to the Board of an Offeree company or the Board of an Offeree company has reason to believe that a Bona Fide Offer may be imminent, no action which could effectively result in an Offer being frustrated, or could result in the shareholders of the Offeree company being denied an opportunity to decide on the merits of an Offer, are to be taken by the Board of the Offeree company in relation to the affairs of the company without the approval of the Offeree company’s shareholders in general meeting 5. (ITA) under Article 104 of the Consolidated Financial Act, unless approved by an ordinary or extraordinary general Shareholders’ Meeting, as the case may be, Italian Listed Companies whose Securities are involved in a Takeover shall abstain from any actions or transactions, which could preclude the achievement of the Takeover’s aims. The company’s Bylaws, however, may provide an exception, in whole or in part, to such rule. Any exceptions shall be notified to Consob and made public. 6. (SGP) under Rule 5 of the Singapore Takeover Code, in the course of an Offer, or even before the date of the Offer, if the Board of the Offeree company has reason to believe that a Bona Fide Offer is imminent, the Board must not, except pursuant to a contract entered into earlier, take+C161:D164 any action, without the approval of shareholders at a general meeting, on the affairs of the Offeree company that could effectively result in any Bona Fide Offer being frustrated or the shareholders being denied an opportunity to decide on its merits |
N1 |
| Frustration by Offeree Board | see Frustrating Action | N1 |
| FSA | See Financial Services Authority. | N6 |
| FSA | acronym for the Financial Services Authority | N1 |
| FSA Handbook | a publication which sets out all the rules and guidance made by the FSA | N1 |
| FSAVC | See free-standing additional voluntary contributions. (See also additional voluntary contributions.) | N6 |
| FSFM | acronym for the Russian Federal Service for Financial Markets | N1 |
| FSMA | acronym for the Financial Services and Markets Act 2000 | N1 |
| FSMA / Financial Services and Markets Authority | The FSMA, the successor to the former Belgian Banking, Finance and Insurance Commission [Commissie voor het Bank-, financie-en Assuratiewezen], is responsible for the supervision of the financial markets and listed companies in Belgium, the approval and supervision of certain categories of financial institutions, the monitoring of compliance with rules of conduct by financial brokers and those marketing investment products for the general public and the so-called social supervision of supplementary pensions | N4 |
| FTC | acronym for Federal Trade Commission | N1 |
| FTSE 100 index | FTSE international index of the top 100 companies in the UK by market capitalisation. It is the most frequently quoted measure of the UK market and is also known as the “Footsie”. (The FTSE 250 measures the next 250 largest companies. The FTSE 350 measures the top 350 companies). | N6 |
| FTSE All-Share Index | FTSE index for the main UK stock exchange. The index covers approximately 800 companies. | N6 |
| FTSE indices | Family of indices compiled and promoted by FTSE International, covering most major stock markets and regions worldwide. | N6 |
| FTSE International | Organisation that produces financial market indices with the involvement of the Faculty and Institute of Actuaries. It is co-owned by the Financial Times and the London Stock Exchange. | N6 |
| Fully Diluted | a common and useful methodology of calculating the number of Target Company common Shares that will be outstanding at the time of a particular event, such as the Closing of an Acquisition. Fully Diluted common Shares outstanding adds to the number of Target Company Shares actually outstanding as of a specified date, the number of additional Shares which would be issued as of the date of the future event assuming all In the Money Options, Warrants and Convertible Securities are exercised or converted on or prior to the event date. The assumption that all such Options, Warrants and Convertible Securities will be turned into Target Company common Shares recognizes the economic reality that this is the only way that holders of those Instruments can realize the In the Money value of their Instruments. | N1 |
| Fully Financed | the financial ability to pay 100 percent of the proposed Bid Price and related expenses by Taking Down all debt and equity Financing Commitments | N1 |
| fully funded | Relates to a situation where a scheme’s assets are sufficient to meet its liabilities (i.e. the scheme’s assets are sufficient to meet its current and future benefit obligations). | N6 |
| Functional Obsolescence | a form of depreciation in which the loss in value or usefulness of an asset is caused by inefficiencies or inadequacies of the asset itself, when compared to a more efficient or less costly newly developed asset. See also Economic Obsolescence, Physical Obsolescence, Replacement Cost Method, and Replacement Cost New. | N7 |
| fund manager | Usually a member of an investment management team who is responsible for ensuring that client portfolios are invested in accordance with agreed mandates and are kept in line with the asset mix specified by the investment team. The fund manager may also be responsible for client reporting and relationship management. (See also investment manager.) | N6 |
| fund of funds | Pooled fund which invests in other funds rather than directly in underlying securities. Differs from a manager of managers in that it is a combination of funds, each of which is separately available. A manager of managers appoints underlying managers to invest separate portions of a single fund. (See also manager of managers.) | N6 |
| fundamental analysis | Assessment of a company’s share value and potential for future cash flows, profit and dividends based on accounting, economic and business information (hence fundamental factors). (See also technical analysis.) | N6 |
| Funding Fee | a fee provided for in the Fee Letter that is paid to the arranger of a Bridge Loan if, and only if, the Bridge Loan is funded. Also known as a Takedown Fee. | N1 |
| funding level | For a pension fund, the ratio of the fund’s assets to its liabilities. Normally relates to defined benefit pension funds and used as a measure of the fund’s ability to meet its future liabilities. | N6 |
| funding risk | Possibility that a defined benefit plan fails to accrue sufficient assets to meet the liabilities as and when they fall due (or more generally the likelihood that funding deteriorates). | N6 |
| Funds Certain Financing | see Committed Financing and Certain Funds | N1 |
| Funds Flow Memorandum | the Closing document that outlines where the money is going. In more complex transactions, the memorandum is often executed or organized by the Issuer/Borrower, particularly when the funding bank is directed to apply the funds in some manner on the Issuer’s/Borrower’s behalf. Also known as a Funds Flow Statement. | N1 |
| Funds Flow Statement | another name for the Funds Flow Memorandum | N1 |
| futures contract | Forward contract that is traded on an organised exchange and subject to the guidelines and rules applied by that exchange. The features distinguishing the futures market from the forwards market are that the futures market uses a clearing house facility, margin payments are required and the terms of futures contracts are standardised. Establishes an obligation to the buyer and seller (or subsequent holders of the contract) to settle the contract through purchase or sale of the underlying asset at the exercise date. | N6 |
| futures exchange | Market in which futures contracts are transacted. | N6 |
| futures margin | When a futures contract is initiated, a deposit (the initial margin) is paid to the future exchange. This normally represents a small percentage of the value of the contract and helps in protecting the exchange against defaults. As the value of the contract changes, additional payments may be requested (the variation margin). | N6 |
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.