M&A glossary
A comprehensive glossary of commonly used terms and concepts in mergers and acquisitions, from financial metrics and valuation to due diligence, transaction documents, and deal structures.
Last updated : July 27th, 2026
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company's operating performance that excludes interest, taxes, depreciation, and amortization.
SDE (Seller's Discretionary Earnings)
A measure commonly used for small businesses that represents the total financial benefit available to the business owner, including the owner's compensation and certain discretionary expenses.
Non-normalized EBITDA
EBITDA calculated from reported financial results before adjustments for unusual, one-time, or owner-specific items.
Multiple
A valuation ratio used to compare the value of a business with a financial metric such as EBITDA or SDE. It is commonly expressed as a multiple of earnings.
Enterprise value and equity value
Enterprise value represents the value of a business including its debt and excluding excess cash, while equity value represents the value attributable to the owners after accounting for debt and other adjustments.
Working capital adjustment
An adjustment to the purchase price based on the amount of working capital delivered with the business at closing compared with an agreed target level.
NDA (Non-disclosure agreement)
A legal agreement that requires parties receiving confidential information to keep that information private and use it only for permitted purposes.
CIM (Confidential Information Memorandum)
A detailed document provided to qualified prospective buyers containing confidential information about a business, including its operations, financial performance, market, and transaction opportunity.
Data room
A secure online repository where sellers provide confidential company documents and information to prospective buyers during an M&A transaction.
Due diligence
The process through which a buyer investigates and verifies a company's financial, legal, operational, commercial, and other relevant information before completing an acquisition.
LOI (Letter of Intent)
A document outlining the key proposed terms of a transaction and demonstrating the parties' intention to proceed with negotiations, subject to agreed conditions.
Earn out
A transaction structure in which part of the purchase price is paid later and depends on the acquired business achieving specified financial or operational targets.
Escrow
An arrangement in which a portion of transaction funds is held by a third party and released when specified conditions are satisfied, often providing protection against certain post-closing claims.