Vijay Shankar Sharma
Textbook finance, M&A, governance, strategy, and organisation terms. Not UNITE and not Layer 4. 147 terms. Textbook meanings only.
147 terms. Page 2 of 3.
ma · intermediate
A contractual provision in an acquisition agreement under which part of the purchase price is contingent on the acquired business achieving specified performance targets after the deal closes, typically used to bridge a valuation gap between buyer and seller. Earn-outs frequently become a source of post-deal dispute, since sellers no longer control operations but their final payout still depends on operating results.
accounting · intro
Also called: EPS
A company's net income divided by its number of outstanding shares, representing the portion of profit attributable to each individual share. It is one of the most commonly cited metrics in equity analysis, and is central to the concept of a deal being accretive or dilutive to an acquirer's shareholders.
finance · intro
Also called: earnings before interest, taxes, depreciation and amortisation
Earnings before interest, taxes, depreciation, and amortisation, a commonly used measure of a company's core operating profitability that strips out the effects of financing decisions, tax jurisdictions, and non-cash accounting charges. It is widely used to compare profitability across companies with different capital structures, though critics note it can obscure real cash costs such as capital expenditure.
strategy · intro
The cost advantages a company gains as its production volume increases, typically because fixed costs are spread over a larger number of units, reducing the average cost per unit. Achieving meaningful economies of scale is a common strategic rationale offered for pursuing growth or consolidation through acquisition.
organizational · intro
The rate at which employees leave an organisation and are replaced, typically expressed as a percentage of the total workforce over a given period. High turnover can indicate underlying problems with management, compensation, or culture, and imposes real costs on an organisation through recruitment, training, and lost institutional knowledge.
risk · intro
Also called: ERM
A structured, organisation-wide approach to identifying, assessing, and managing the full range of risks a company faces, including financial, operational, strategic, and reputational risks, rather than managing each risk category separately in isolation. It is intended to give senior leadership and the board a comprehensive, integrated view of the organisation's overall risk profile.
finance · intro
Also called: EV
A measure of a company's total value that adds its market capitalisation to its total debt and subtracts its cash and cash equivalents, representing the theoretical price a buyer would need to pay to acquire the entire business, including taking on its debt. It is widely used as the numerator in valuation multiples, such as enterprise-value-to-EBITDA, because it is capital-structure neutral.
ma · intermediate
An arrangement in which a portion of an acquisition's purchase price is held by a neutral third party for a specified period after closing, to be released to the seller once any indemnification claims or other contingencies have been resolved. It protects a buyer's ability to recover funds if problems with the acquired business surface after the deal has already closed.
governance · intro
Also called: environmental, social, and governance
A framework used by investors and companies to evaluate performance and risk across environmental, social, and governance factors, alongside traditional financial metrics. It has become an increasingly prominent, and increasingly debated, part of institutional investment and corporate reporting practice over the past decade.
governance · intro
The total package of pay and incentives, including salary, bonuses, stock awards, and other benefits, provided to a company's senior executives. Its structure is closely scrutinised by shareholders and regulators for how well it aligns executives' financial incentives with long-term company and shareholder performance.
governance · intro
A legal obligation requiring a person in a position of trust, such as a company director, to act in the best interests of another party, typically the company and its shareholders, rather than their own personal interests. It generally encompasses a duty of care, requiring informed and diligent decision-making, and a duty of loyalty, requiring the avoidance of self-dealing and conflicts of interest.
strategy · intro
The competitive benefit a company can gain by being the first to enter a new market or introduce a new product category, potentially including brand recognition, customer loyalty, and control over scarce resources or distribution channels, before competitors arrive. It is not guaranteed, and later entrants sometimes outperform first movers by learning from and improving on the original's mistakes.
organizational · intermediate
An organisational structure with few or no intermediate layers of management between senior leadership and front-line employees, associated with a wide span of control. It is often associated with faster decision-making and more direct communication, though it can also limit clear career progression paths and place heavy coordination demands on remaining managers.
risk · intermediate
A contractual clause that relieves parties from performing their obligations, or delays their performance, when extraordinary events beyond their reasonable control, such as natural disasters, war, or government action, prevent them from doing so.
finance · intro
Also called: FCF
The cash a company generates from its operations after accounting for the capital expenditure needed to maintain or grow its asset base, representing the cash actually available to be returned to lenders and shareholders or reinvested in the business. It is often considered a cleaner measure of financial health than reported net income, since it is harder to distort through accounting choices.
accounting · intro
Also called: Generally Accepted Accounting Principles
Generally Accepted Accounting Principles, the standardised set of accounting rules and procedures used primarily in the United States to prepare and present financial statements, intended to ensure consistency and comparability across companies. It differs in various technical respects from the International Financial Reporting Standards used in many other countries.
governance · intermediate
A contractual provision guaranteeing a company's senior executives substantial financial benefits, such as severance pay or accelerated equity vesting, if their employment is terminated following a change of control, such as an acquisition. Golden parachutes are intended partly to reduce executives' personal incentive to resist a deal that would benefit shareholders.
ma · intermediate
An intangible asset recorded on an acquirer's balance sheet representing the amount paid for a target company in excess of the fair value of its identifiable net assets, reflecting factors such as brand reputation, customer relationships, and expected synergies. Goodwill must be periodically tested for impairment, and a write-down can signal that an acquisition has not performed as expected.
accounting · intermediate
A write-down recorded when a company determines that the goodwill on its balance sheet, typically created by a past acquisition, is worth less than its recorded value, often because the acquired business has underperformed expectations. A significant goodwill impairment is a common, publicly visible signal that a past acquisition has not delivered the value originally anticipated.
accounting · intro
Also called: gross profit margin
The percentage of revenue remaining after subtracting the direct cost of producing the goods or services sold, calculated as gross profit divided by revenue. It reflects the fundamental profitability of a company's core product or service before accounting for operating expenses such as marketing, administration, and research.
risk · intro
A risk management strategy that involves taking an offsetting financial position to reduce exposure to adverse price movements in an asset, currency, commodity, or interest rate. Common hedging instruments include futures, options, and swaps, and while hedging reduces downside risk it typically also reduces potential upside.
organizational · intro
An organisational structure in which individuals and roles are ranked according to authority and responsibility, with each level typically reporting to, and receiving direction from, the level above it. Most large organisations rely on some degree of hierarchy to coordinate work and clarify accountability, even as flatter structures have grown more common in some industries.
strategy · intermediate
A strategy in which a company acquires or merges with other companies operating at the same stage of the value chain, typically competitors, in order to increase market share, achieve economies of scale, or reduce competitive intensity within an industry.
ma · intermediate
An acquisition attempt pursued directly against the wishes of a target company's board of directors, typically by appealing straight to shareholders through a tender offer or a proxy fight to replace the board. Target companies facing a hostile approach often deploy defensive measures such as a poison pill to make the acquisition more difficult or costly.
accounting · intro
Also called: International Financial Reporting Standards
International Financial Reporting Standards, the accounting standards used by companies in most countries outside the United States to prepare financial statements, developed and maintained by the International Accounting Standards Board. Efforts to converge IFRS and the United States' GAAP standards have narrowed, though not eliminated, differences between the two systems.
organizational · intro
The design of compensation, performance measurement, and reward systems so that individuals' personal incentives lead them to act in ways that also serve the organisation's broader goals. Poor incentive alignment is a common root cause of otherwise puzzling organisational behaviour, since people generally respond rationally to how they are actually measured and rewarded.
accounting · intro
Also called: profit and loss statement, P&L
A financial statement summarising a company's revenues, expenses, and resulting profit or loss over a specific reporting period, such as a quarter or a year. It is also commonly called the profit and loss statement, and its bottom line, net income, is one of the most widely used single measures of company performance.
ma · intermediate
A contractual obligation for one party to compensate the other for specified losses, such as those arising from a breach of representations and warranties discovered after a deal closes. Indemnification provisions in acquisition agreements typically specify caps, thresholds, and time limits on how much can be claimed and for how long.
governance · intro
A member of a company's board of directors who has no material financial or personal relationship with the company beyond board service, intended to provide objective oversight of management free from the potential conflicts of interest that affect executive or affiliated directors.
finance · intro
Also called: IPO
The process by which a private company first offers its shares to the public on a stock exchange, converting it into a publicly traded company. It is a major event in a company's lifecycle, typically pursued to raise capital, provide liquidity to early investors, and raise the company's public profile, while also bringing new regulatory and disclosure obligations.
ma · intermediate
Also called: post-merger integration, PMI
The process of combining two companies' operations, systems, cultures, and personnel following the close of a merger or acquisition, aimed at realising the synergies and strategic goals that justified the deal. Integration is widely regarded as the stage where many otherwise well-structured deals fail to deliver their expected value.
finance · intro
Also called: IRR
The discount rate at which an investment's projected cash flows produce a net present value of exactly zero, commonly used as a single summary figure for an investment's expected annualised return. It is often compared against a company's cost of capital or a minimum acceptable return, or hurdle rate, to decide whether a project is worth pursuing.
accounting · intermediate
A measure of how many times a company sells and replaces its inventory over a given period, calculated by dividing cost of goods sold by average inventory. A low turnover ratio can indicate weak sales or excess inventory, while a very high ratio can sometimes indicate insufficient stock to meet demand.
strategy · intro
Also called: JV
A business arrangement in which two or more companies create a new, separate entity to pursue a specific shared business objective, with each parent company contributing resources and sharing in the risks, profits, and control of the new entity.
risk · intro
The risk that a company's performance or continuity depends heavily on a small number of specific individuals, such as a founder, key executive, or top salesperson, such that their departure, incapacitation, or death could materially harm the business. It is a particular concern in founder-led businesses and smaller companies with limited management depth.
governance · intermediate
A designated independent board member who coordinates the activities of the other independent directors and serves as a primary liaison between them and senior management, particularly important in companies where the chief executive also serves as chairman of the board.
ma · intro
Also called: LOI
A preliminary, generally non-binding document outlining the key proposed terms of a transaction before a definitive, legally binding agreement is negotiated and signed. It signals serious intent to proceed and typically covers price, structure, and exclusivity, while leaving detailed legal terms to be worked out afterward.
finance · intro
Also called: financial leverage, gearing
The use of borrowed funds to increase the potential return on an investment, magnifying both gains and losses relative to what would result from using equity capital alone. A highly leveraged company carries more fixed financial obligations, which increases the risk of financial distress if operating performance weakens.
ma · intermediate
Also called: LBO
An acquisition financed with a significant proportion of borrowed money, with the assets and cash flows of the acquired company itself often used as collateral for the debt. Leveraged buyouts are a core strategy of private equity firms, aiming to amplify equity returns while requiring successful post-acquisition operating performance to service the resulting debt.
finance · intermediate
A contractual right, typically held by preferred shareholders such as venture capital investors, entitling them to be paid back a specified amount, often before common shareholders receive anything, in the event a company is sold, liquidated, or otherwise wound down.
risk · intermediate
The risk that a company or investor will be unable to meet short-term financial obligations, or will be unable to sell an asset quickly without accepting a significant price discount, because of insufficient cash or a lack of ready buyers in the market.
finance · intro
Also called: market cap
The total market value of a public company's outstanding shares, calculated by multiplying the current share price by the number of shares outstanding. It is the most commonly cited single figure for a public company's size, though it reflects equity value only and does not account for debt.
ma · intermediate
Also called: mac clause
A contractual clause in an acquisition agreement that allows a buyer to walk away from, or renegotiate, a deal if the target company experiences a significant negative change in its business, financial condition, or prospects between signing and closing. Disputes over whether a given event actually qualifies as a material adverse change are a recurring source of M&A litigation.
organizational · intermediate
An organisational structure in which employees report to more than one manager simultaneously, typically along both a functional line, such as finance or engineering, and a project or product line. It is intended to improve resource flexibility and cross-functional collaboration, though it can also create conflicting priorities and unclear accountability.
ma · intro
A transaction in which two companies combine to form a single new entity, as distinguished from an acquisition, in which one company absorbs another that ceases to exist as a separate entity. In practice the terms merger and acquisition are often used loosely and interchangeably, even though they describe technically distinct legal and structural outcomes.
ma · intro
An ownership position in a company representing less than fifty percent of its voting shares, giving the holder some financial exposure and, depending on specific rights negotiated, some influence, but not outright control over the company's decisions.
accounting · intro
Also called: net profit margin
The percentage of revenue that remains as net income after all expenses, including cost of goods sold, operating expenses, interest, and taxes, have been deducted, representing a company's overall bottom-line profitability.
finance · intro
Also called: NPV
The sum of the discounted values of all expected future cash flows from an investment, minus the initial cost of making it, used to determine whether an investment is expected to create or destroy value. A positive net present value indicates the investment is expected to earn more than its cost of capital; a negative one indicates the opposite.
strategy · intro
A phenomenon in which a product or service becomes more valuable to each user as more people use it, common in communication platforms, marketplaces, and social networks. Strong network effects can create a significant competitive moat, since a new entrant must attract a large user base before it can offer comparable value to an established competitor's network.
ma · intro
Also called: NDA
A legal contract requiring parties to keep specified information confidential, commonly signed early in deal discussions before sensitive financial or operational information is shared with a prospective buyer during due diligence.