Equity Bridge
An equity bridge, also known as an equity bridge loan or bridge equity, is a short-term loan provided by investment banks to sponsors (typically private equity firms) in leveraged buyouts (LBOs) to finance the equity portion of the deal. The purpose of an equity bridge is to allow the sponsor to contribute a smaller amount […]
Working Capital Adjustment
This is an adjustment to the purchase price in an M&A transaction based on changes in the target’s working capital between the signing and closing of the deal.
Thin Capitalization
This is a financial situation in which a company is carrying more debt than equity.
Retention Amount
This is an amount of money held back from the purchase price in an M&A transaction to cover potential future liabilities.
Quality of Numbers and Quality of Earnings
These are assessments of the reliability and sustainability of a company’s reported earnings.
Pro forma financial information
This is financial information that has been adjusted to reflect certain events or hypothetical scenarios.
Earn-Out
This is a provision that allows the seller of a business to receive additional future compensation based on the business achieving certain future financial goals.
Discount for lack of control, control premium
These are adjustments to the valuation of a company based on the level of control an investor can exercise.
Debt Pushdown
This is a financial strategy used in M&A where the debt of an acquiring company is transferred to a subsidiary or the acquired company.
Cash Conversion Cycle
This is a metric that expresses the time (in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
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