Dictionary
Every technical term the modules use, defined properly. 550 entries, each with the detail a module has to skip to keep moving. Any bolded term inside a module links straight here.
A
Ability to pay analysis
An LBO solved backwards from a required return to give the highest price a financial sponsor could justify, which is a constraint rather than a valuation.
Absolute priority
The rule that senior claims must be paid in full before any junior class receives anything.
Acceptance condition
The condition in a UK contractual takeover offer that enough shareholders accept to take the bidder above 50% of the voting rights.
Accounting acquirer
The party IFRS 3 identifies as having obtained control in a business combination, whose assets are not restated and whose comparatives are presented.
Accretive
A deal that raises the acquirer's pro forma earnings per share.
Accrual accounting
Recording revenue when it is earned and costs when they are incurred, regardless of when cash moves.
Accrued expense
A cost already incurred but not yet paid or invoiced, recorded as an expense now and as a liability until the cash goes out.
Acquisition vehicle
The new company formed to make the purchase, which raises the acquisition debt and holds the shares in the target so that neither sits at the fund.
Ad hoc committee
An informal group of holders of the same debt that organises, appoints advisers at the company's expense, and negotiates as a bloc.
Add back schedule
The line by line list of items added to reported EBITDA to reach an adjusted figure, and the document a price is argued over.
Additional tier 1
Perpetual bank capital instruments ranking above common equity, with discretionary coupons and a contractual trigger that converts or writes them down.
Adjusted EBITDA
Reported EBITDA restated for items management argues are not part of the ongoing business, and the figure most deals are actually priced on.
Adjusted funds from operations
FFO less the recurring capital expenditure needed to maintain the portfolio, the best proxy for distributable cash.
Adjusted present value
Valuing a business as if unlevered, then adding the value of financing effects separately, used when the capital structure changes over time.
Amend and extend
A negotiated push out of a loan's maturity, paid for with a fee and a wider margin, used when a full refinancing is not available.
Annual recurring revenue
The annualised value of a software company's contracted subscription revenue, excluding one off items.
Anti dilutive
A potential share that would raise earnings per share if it were included, and is therefore left out of the diluted calculation.
Assessment centre
The final interview stage: several back to back interviews plus group and case exercises, assessed together in one decision.
Asset based valuation
Valuing a business as the fair value of what it owns less what it owes, rather than on the earnings it generates.
Asset beta
Beta with the effect of leverage stripped out, describing the risk of the business itself.
Asset deal
Buying the assets and liabilities of a business directly, rather than buying the shares of the company that owns them.
Asset turnover
Revenue divided by the assets employed to produce it, showing how much sales each euro of asset base carries.
Authority to allot
The shareholder permission a UK board needs before issuing shares, and the separate resolution needed to issue them outside the existing register.
B
Backlog
The value of orders received but not yet delivered, a leading indicator of future revenue.
Backlog coverage ratio
Backlog divided by expected revenue over the next twelve months, expressed as the years of revenue already contracted.
Bake off
A competitive selection where several banks pitch for the same mandate and one is appointed.
Balance check
A formula row computing total assets less total liabilities and equity in every period, which should read zero throughout.
Balance sheet
A snapshot of what the business owns and owes at a single moment in time.
Bargain purchase
An acquisition where the fair value of identifiable net assets exceeds the price paid, producing an immediate gain rather than goodwill.
Base rate
How common something is before any evidence arrives, and the input that decides what a positive test result is actually worth.
Basis of preparation
The stated set of judgements behind carve out or combined financial statements, describing what was included and how central costs were allocated.
Basis point
One hundredth of a percentage point, the standard unit for quoting rates and spreads.
Basis risk
The risk that a hedge and the exposure it covers do not move together, leaving a residual the hedge was never going to cover.
Bayes theorem
The rule for flipping a conditional probability round, turning the chance of the evidence given the cause into the chance of the cause given the evidence.
Behavioural indicator
A specific observed action or statement recorded by an assessor as evidence, positive or negative, under one named competency.
Big Four corporate finance
The lead advisory and transaction services arms of the large accountancy firms, a significant route into mid market advisory across continental Europe.
Billings
What a company invoiced in the period, approximated by revenue plus the movement in deferred revenue.
Binding offers
The second round submission: a committed price with a marked up sale agreement and evidence of funding.
Black-Scholes
The closed form option price derived from a hedging argument, and the shared language in which options are quoted.
Blocking stake
A holding large enough to stop a class approving a restructuring, which is one unit above the complement of the required majority.
Board neutrality
The UK rule preventing a target board from taking defensive action during a bid without shareholder approval.
Book to bill
New orders divided by revenue in the same period. Above one means the backlog is growing.
Bookbuild
The process of collecting investor demand at different prices to set the size and price of an offering.
Bookings
The value of contracts signed in a period, recognised on signature rather than as the service is delivered.
Bookrunner
The bank that runs the order book on an offering, driving pricing and controlling allocation.
Bootstrapping
A high P/E acquirer buying low P/E targets in stock, generating EPS growth by arithmetic rather than by improving anything.
Bottom up
Forecasting revenue from the company's own operating units: stores, customers, contracts, capacity.
Break fee
A payment owed if a signed deal fails for specified reasons, compensating the other side for its wasted cost and risk.
Breakeven synergies
The level of synergies that leaves an acquirer's shareholders no better and no worse off after paying a control premium.
Bridge loan
A committed short term loan that funds a deal on time and is designed to be replaced by permanent debt soon afterwards.
Broker consensus
The average of published analyst estimates for a listed company, and the usual source of the denominator in a forward multiple.
Bulge bracket
A full service bank combining advisory with underwriting, lending and markets, advising on the largest and most cross border transactions.
Burn rate
The cash a loss making company consumes per period, normally net operating outflow plus capital expenditure.
Buy and build
A strategy of acquiring a platform company and then adding smaller businesses in the same sector, combining multiple arbitrage with genuine scale.
C
CAC payback
How long a customer takes to repay the cost of acquiring them, measured out of gross profit rather than revenue.
Calendarisation
Restating peers with different fiscal year ends onto a common period so their multiples are actually comparable.
Call option
The right, and not the obligation, to buy something at a fixed price up to an agreed date.
Call protection
Terms restricting an issuer from redeeming a bond early, protecting the investor's expected yield.
Cap rate
Net operating income divided by property value: the unlevered yield on a real estate asset, and a multiple inverted.
Capex
Cash spent on long lived assets, which never appears on the income statement except through depreciation.
Capital intensity
Capital expenditure as a share of revenue, the measure of how much investment a business needs to stand still.
Capitalised development costs
Development spend carried on the balance sheet as an intangible under IAS 38 rather than expensed, and amortised later.
Capitalised earnings method
The German standard approach to company valuation in appraisal contexts, discounting sustainable earnings distributable to shareholders rather than cash flow to the firm.
CAPM
The model that estimates cost of equity as the risk free rate plus beta multiplied by the equity risk premium.
Care and maintenance
Holding a mine, plant or field idle but preserved, so production can restart when prices recover rather than the asset being abandoned.
Carried interest
The manager's share of a fund's profits, conventionally a fifth, paid only after investors have their capital back plus the preferred return.
Carrying amount
What an asset is recorded at on the balance sheet today, being its original cost less accumulated depreciation and any impairment.
Carve out
The sale of a division that has never existed as a standalone business, requiring it to be separated first.
Cash available for debt service
What is left of EBITDA once capital expenditure, working capital and cash tax have been paid, which is the figure a lender actually sizes debt against.
Cash box placing
A placing engineered so shares are issued for non cash consideration, which keeps UK statutory pre-emption from applying to it.
Cash conversion
The share of reported EBITDA that survives capital expenditure, working capital and cash tax, and therefore the figure that decides how fast a buyout can repay debt.
Cash conversion cycle
Days inventory plus days receivable less days payable: how long cash is tied up between paying for stock and collecting from the customer.
Cash EPS
Reported earnings per share with acquisition related intangible amortisation added back, used by acquirers to show earnings before purchase accounting effects.
Cash flow hedge
An IFRS 9 designation that holds the effective gain or loss on a hedging instrument outside profit until the hedged transaction affects profit.
Cash flow statement
A reconciliation from accrual profit to the actual movement of cash, split into operating, investing and financing.
Cash gross profit
Gross profit measured in absolute currency rather than as a percentage of sales, which is what actually covers a retailer's fixed costs.
Cash runway
Cash and equivalents divided by the burn rate: the months before a company must raise, partner an asset or stop.
Cash sweep
A requirement that surplus cash is used to repay debt rather than retained or distributed.
Cash tax rate
Tax actually paid in the period divided by pre tax profit, which can sit well below the book charge for years.
Centralised procedure
The single EU application route producing one marketing authorisation valid across the whole Union.
Centre of main interests
The place where a company conducts the administration of its interests on a regular basis, which determines where its main insolvency proceedings can be opened in the EU.
Certain funds
The requirement that a bidder's cash consideration is fully committed and almost unconditional before a UK offer is announced.
Chain principle
The Takeover Code rule under which buying control of one company can trigger a mandatory offer for a listed company it holds a stake in.
Circular reference
A set of cells that each need one of the others before they can calculate, most commonly interest, the cash swept and the closing debt balance.
Circularity switch
A toggle cell that breaks the interest loop on demand, letting a model recalculate cleanly when an error has propagated around it.
Click and collect
An order placed online and collected in a shop, which different retailers book into store sales or into online sales.
Closed period
A defined window before an issuer announces results in which its directors and senior managers may not deal in its shares, whether or not they hold inside information.
Collar
A band on the acquirer's share price inside which the agreed exchange structure holds and outside which it flexes, sharing the risk between signing and completion.
Collateralised loan obligation
A fund that buys leveraged loans and finances itself by issuing rated tranches against them, and the dominant buyer of term loan B paper.
Combined ratio
Claims plus expenses as a percentage of earned premium at a general insurer, with anything below 100 meaning underwriting was profitable on its own.
Commercial awareness
The ability to connect something happening in markets to what it means for a company, and then to what it means for a bank advising that company.
Commercial income
Income a retailer earns from its suppliers rather than its customers, including listing fees, volume rebates and promotional support.
Commitment letter
The binding document in which banks agree to provide acquisition financing, subject to a stated list of conditions.
Common equity tier 1
The highest quality regulatory capital a bank holds, ordinary shares and retained earnings less goodwill and other deductions, measured against risk weighted assets.
Company specific risk premium
An increment to the cost of equity for risks particular to one company, and the most common source of double counting in a discount rate.
Competency framework
The short written list of behaviours a firm assesses against, with defined examples of strong and weak performance for each one.
Competency interview
An interview probing past behaviour as evidence of future performance, answered in structured examples rather than claims.
Conditional marketing authorisation
An EU authorisation granted on less complete evidence where the medical need is unmet, subject to obligations to complete confirmatory studies.
Conditional probability
The probability of one event given that another is already known to have happened, which changes the denominator rather than the arithmetic.
Confidential information memorandum
The detailed selling document describing the business, its market and its financials, sent to bidders who have signed an NDA.
Conglomerate merger
A combination of companies in unrelated businesses, where the rationale is diversification rather than operational overlap.
Constant currency
Growth measured by translating both periods at the same exchange rate, so the underlying performance shows through the currency move.
Contingent conversion
A convertible term that opens the right to convert only once a stated condition is met, so being in the money is not by itself enough.
Contingent liability
A possible obligation disclosed in the notes rather than recognised, because an outflow is not probable or cannot be measured reliably.
Contingent value right
A security paying target shareholders only if a defined future event occurs, used to bridge disagreement about an uncertain outcome.
Contra asset
A credit balance that sits against an asset and reduces it, rather than being presented as a liability.
Contractual subordination
Ranking a claim behind another by agreement rather than by law, usually through an intercreditor agreement.
Control premium
The excess over the traded share price an acquirer pays for the right to direct the whole business.
Conversion premium
How far a convertible's conversion price is set above the share price on the day the deal is priced.
Convertible bond
A bond whose holder may exchange it for a fixed number of the issuer's shares instead of taking repayment.
Corkscrew
A schedule built as opening balance, movements, closing balance, with each period's closing balance becoming the next period's opening balance.
Cornerstone investor
An institution that commits to a set allocation at the eventual offer price before the roadshow starts, and is named in the prospectus.
Cost of risk
A bank's loan impairment charge expressed in basis points of average gross loans, the standard unit for comparing credit costs across lenders.
Cost synergies
Savings from removing duplication between two combined businesses.
Cost to serve
The picking, packing, delivery and returns cost of fulfilling an online order, which sits below gross profit and decides whether the order paid.
Country risk premium
An addition to the cost of equity meant to capture risks of operating in a particular country that a developed market beta does not price.
Coupon step up
A clause raising a bond's coupon if the issuer is downgraded past a stated threshold, and lowering it again on an upgrade.
Covenant
A contractual condition in a credit agreement restricting what the borrower may do or requiring it to stay within a financial ratio.
Covenant lite
A loan carrying no maintenance financial test, only incurrence covenants tested when the borrower acts.
Coverage team
A team organised by client industry that owns the relationship, originates ideas, and stays on the deal alongside the product team.
Covered interest parity
The relationship tying the forward exchange rate to the interest rate differential between two currencies.
Credit agreement
The definitive document governing a loan once funded, negotiated in the weeks between signing a commitment and closing.
Credit rating
An agency's opinion on how likely a borrower is to pay what it owes in full and on time, expressed as a letter.
Credit spread
The extra yield a borrower pays over a government or reference rate, and the market's live price of that borrower's risk.
Cross class cram down
The court's power to bind an entire class that voted against a restructuring plan, available only where the statutory conditions are met.
Current expected credit losses
The US GAAP impairment model, requiring a lifetime expected loss allowance on every loan from the day it is first recognised.
Current yield
A bond's coupon divided by its market price, which measures income received and ignores the pull back to par.
Customer lifetime value
The gross profit a customer is expected to generate across the whole relationship, usually annual gross profit divided by the churn rate.
D
Data room
The controlled repository of company information bidders use to run diligence, with access logged and staged.
Days inventory outstanding
Inventory divided by daily cost of sales: how many days of trading are sitting in stock.
Days payable outstanding
Trade payables divided by daily cost of sales: how long the company takes to pay its suppliers.
Days sales outstanding
Trade receivables divided by daily revenue: how long customers take to pay.
Deal contingent hedge
A currency or rate hedge that terminates at no cost if the underlying transaction does not complete.
Deal team
The bankers staffed on one mandate, usually four or five people, with each rank owning a different question.
Debt capacity
How much borrowing a business can support out of its own cash generation, which sets how far leverage can lift what a financial buyer can pay.
Debt capital markets
The desk that arranges bond issues, mostly for investment grade borrowers who come to market repeatedly.
Debt free cash free
The convention of agreeing a price for the business itself, with the seller taking the cash and settling the debt out of the proceeds.
Debt like item
A liability that behaves like borrowing in the bridge even though it is not called debt, because it is a claim on future cash ranking ahead of shareholders.
Debt schedule
The section of a model that tracks each borrowing from opening to closing balance and produces the interest charge the income statement needs.
Debt yield
Net operating income divided by the loan amount, a sizing test that depends on neither the valuation nor the interest rate.
Decision tree analysis
Valuing each outcome with the management decision that would follow it built in, then probability weighting, which captures optionality without option pricing.
Decommissioning provisions
The liability for dismantling and restoring a site at the end of an asset's life, common in energy and mining.
Deferred consideration
The part of a purchase price the buyer does not pay at completion, whether contingent on performance, on an event, or only on time.
Deferred revenue
Cash collected from a customer before the work has been done, recorded as a liability until it is earned.
Deferred tax asset
A future tax saving the company has already earned, most often from losses it can set against later profits.
Deferred tax liability
Tax the company will owe in future because it has already taken a deduction for tax purposes that it has not yet taken in its accounts.
Deleveraging
Using the company's own cash flow to repay acquisition debt, which converts enterprise value into equity value.
Deposit beta
The proportion of a policy rate rise that a bank passes through to its depositors.
Depreciation
The spreading of an asset's cost across the periods it is used, a real expense that consumes no cash.
Dilutive
A deal that reduces the acquirer's pro forma earnings per share.
Direct lending
Lending by a credit fund straight to a borrower, holding the loan rather than syndicating it to a broad investor market.
Dis-synergy
A permanent cost a transaction creates rather than removes, most often the extra cost of running a carved out business alone.
Discount for lack of marketability
A reduction applied when valuing a stake that cannot be sold quickly, because illiquidity itself has a cost.
Discount rate
The rate at which future cash flows are reduced to present value, reflecting both the time value of money and risk.
Discount rate mismatch
Discounting a cash flow at a rate belonging to a different set of claimants, the commonest structural error in a candidate built DCF.
Discounted cash flow
Valuing a business on the cash it is expected to generate, discounted back to today at a rate reflecting its risk.
Distressed debt
Claims trading well below face value because the market doubts they will be repaid in full, and the investors who buy them at that discount.
Distributable reserves
The accumulated realised profits from which a company may lawfully pay a dividend, a company law limit separate from any credit agreement.
Divestiture
The disposal of a business unit by its parent, most commonly a sale to a buyer for cash.
Dividend discount model
Valuing equity directly as the present value of distributions to shareholders, discounted at the cost of equity.
Dividend recapitalisation
Raising new debt in a portfolio company and paying the proceeds to its shareholders, without any change of ownership.
Downside case
The deliberately unkind scenario run beside the base case, testing what the equity is worth if the business underperforms and the exit multiple compresses.
Driver based
Forecasting each line from the operational quantity that actually causes it, rather than as a percentage of revenue.
Dual track
Running a private sale process and a stock market listing in parallel, deferring the choice between them until both are ready to complete.
Due diligence
The buyer's investigation of a target before committing, covering financial, commercial, legal, tax and operational risk.
Duration
A measure of how sensitive a bond's price is to a change in interest rates, expressed in years.
DV01
The change in the value of a position for a one basis point move in yield, expressed in currency rather than as a percentage.
E
Earnings yield
The inverse of the P/E ratio: earnings per share divided by price, and the cost of funding a deal with stock.
Earnout
Deferred consideration paid only if the acquired business hits agreed targets after completion.
EBITDA
Earnings before interest, tax, depreciation and amortisation: a rough proxy for operating cash generation, and the standard denominator in deal multiples.
EBITDA growth
The operational half of a buyout return: growing earnings through revenue growth, margin improvement or acquisitions.
EBITDAR
EBITDA before rent, used to compare a business that charges rent above the line with one that does not.
Economies of scale
The mechanism behind most credible cost synergies: a cost that does not rise in proportion to volume.
Effective tax rate
The reported tax charge divided by pre tax profit, a book measure of what the accounts recorded rather than what was paid.
Elite boutique
An advisory only firm with no underwriting or lending, competing for large mandates on senior relationships and the absence of a financing conflict.
Embedded value
A life insurer's shareholder net assets plus the present value of future profits on policies already written, used because reported earnings capture almost none of the economics.
Energy intensity
The share of revenue or of cost of goods sold that energy represents, which decides whether an energy price move is a line item or a competitive problem.
Enterprise value
What the operating business is worth, independent of how it happens to be financed.
Entry multiple
The multiple of EBITDA a sponsor pays at completion, which sets how much of the exit belongs to the equity because lenders fund turns rather than a share of the price.
EPRA earnings
The recurring result from operating a property portfolio, stripping revaluations, disposal gains and derivative marks out of IFRS profit.
EPRA net tangible assets
The European industry standard net asset measure, adjusting reported net assets for intangibles, derivative marks and deferred tax that will not crystallise.
Equity capital markets
The desk that prices and places new shares with investors, covering listings, further issues, shareholder offers and convertibles.
Equity cheque
The cash the fund itself contributes to a buyout, sized as the residual once debt and every other source has been counted.
Equity method investment
A stake carrying significant influence but not control, reported as one line below operating profit and subtracted in the bridge.
Equity story
The argument for why a business is worth what its owners intend to ask, and the spine of every selling document.
Equity value
What the shareholders own: share price multiplied by fully diluted shares outstanding.
Escrow
Part of the purchase price paid to a third party and released after an agreed period, so there is something for the buyer to claim against.
EU Preventive Restructuring Directive
The EU directive requiring every member state to offer a restructuring framework available before insolvency, with class voting and cross class cram down.
Exchange ratio
The number of acquirer shares a target shareholder receives for each target share held.
Exclusivity
A period in which the seller agrees to negotiate with one bidder only, trading competitive tension for speed and certainty.
Exit multiple method
Calculating terminal value by assuming the business is sold at the end of the forecast at a multiple of its final year earnings.
Expected value
The probability weighted average of every possible outcome, and the standard basis for choosing between uncertain payoffs.
F
Fade period
Years inserted between the explicit forecast and the terminal value in which growth, margin and returns converge toward sustainable levels.
Fair value step up
The increase in an acquired asset's carrying value when it is restated from the seller's historic cost to fair value at completion.
Fairness opinion
A written opinion from an investment bank that the consideration in a transaction is fair, from a financial point of view, to the shareholders receiving it.
Fallen angel
A bond downgraded from investment grade into high yield, which forces selling by holders who are no longer allowed to own it.
Fiduciary out
The exception in a no shop that lets a board engage with an unsolicited superior proposal despite having agreed not to look for one.
FIFO
The cost flow convention that charges the oldest inventory cost to cost of sales and leaves the newest cost on the balance sheet.
Financial buyer
A private equity firm or similar investor buying a business as a standalone investment to sell again at a return.
Financing overhang
The depressing effect on a share price of a capital raise the market can see coming.
Financing transaction
A transaction that exchanges one form of capital for another and never touches the income statement.
Finite life asset
An asset with a defined end date, where a perpetuity terminal value is wrong in principle rather than merely aggressive.
Firm commitment
An underwriting in which the banks buy the whole issue themselves, as opposed to a best efforts deal where they only agree to try to place it.
First round
The opening stage of an auction, where bidders price the business off the CIM and submit non binding indications.
Fixed costs
Costs that do not move with volume, at least within a normal operating range.
Fixed exchange ratio
A share deal in which the number of acquirer shares per target share is locked at signing, so the value delivered floats with the acquirer's price.
Floating exchange ratio
A share deal in which the value per target share is locked and the ratio is recalculated near completion, so the share count floats.
Football field
A chart stacking the value range produced by each method as a horizontal bar on a common axis, so a client can see where the methods agree.
Forecast horizon
How many years a DCF forecasts explicitly before capitalising the rest, chosen by how long the business needs to reach a steady state.
Foreign investment screening
A government review of an acquisition on national security or public order grounds, separate from and additional to merger control.
Forum shopping
Choosing the jurisdiction in which to restructure, and where necessary creating the connection that makes that jurisdiction available.
Forward contract
A bilateral agreement to exchange a fixed amount at a fixed rate on a fixed future date, negotiated to match the exposure it covers.
Forward multiple
A multiple whose denominator is an estimate of future earnings rather than reported ones, usually the next twelve months or the next financial year.
Frame agreement
An agreement fixing prices, specifications and terms with a customer without committing that customer to any volume.
Free float
The proportion of a company's shares genuinely available to trade, rather than held by insiders, sponsors or strategic holders.
Fulcrum security
The most senior claim not fully covered by the enterprise value, and therefore the class that converts into the new equity.
Functional currency
The currency of the primary economic environment in which an entity operates, which decides how its transactions and results are accounted for.
Fund life
The fixed term of a closed end fund, conventionally about ten years, split into an investment period and a harvest period.
Fundamental change
A convertible indenture's change of control clause, giving holders a put at par and a temporary increase in the conversion rate.
Fundamental derivation
Deriving terminal growth from what the business must actually do to achieve it: growth equals reinvestment rate multiplied by ROIC.
Funds from operations
Net income adjusted to add back property depreciation and strip out gains on sale, the standard earnings measure for a REIT.
Futures contract
A standardised exchange traded contract to buy or sell a set quantity on a set date, settled in cash every day through margin.
G
Gain on disposal
The difference between the proceeds from selling an asset and its carrying amount, recognised in profit but reversed out of operating cash flow.
Go shop
A window immediately after signing during which the target is permitted to solicit competing offers, reversing the no shop for a defined period.
Going concern premium
The excess of going concern value over the value realised if the business stops, which is the surplus a restructuring exists to preserve and divide.
Going concern value
What a business is worth if it keeps operating, valued on its future cash flows.
Goodwill
The residual left when the price paid for a business exceeds the fair value of its identifiable net assets.
Greenshoe
An option letting underwriters sell up to 15% more shares than the base deal and buy them back if the price falls.
Gross spread
The difference between what investors pay for a new issue and what the company receives, and the syndicate's fee for underwriting it.
Gross to net
The bridge from a medicine's published list price to the revenue the manufacturer actually recognises.
Group exercise
An assessed team task where the scoring is on how you help the group reach a decision, not on how much you speak.
Growth capex
Capital spending that adds capacity the company does not currently have, as opposed to replacing the asset base it already runs.
H
Hamada equation
The formula linking levered and unlevered beta through the debt to equity ratio and the tax rate.
Hardcoded input
A number typed directly inside a formula rather than referenced from a labelled input cell, so the choice is invisible to anyone reading the model.
Health technology assessment
The national process deciding whether a health system funds a new treatment, and at what price.
Hedge ratio
The proportion of a forecast exposure that is actually covered, which for a corporate is normally well below all of it.
Hell or high water
The strongest regulatory efforts covenant, obliging a buyer to take whatever action a competition authority requires to obtain clearance.
High yield bond
A bond from a below investment grade issuer, paying a higher coupon to compensate for the credit risk.
Historical cost
Carrying an asset at what was paid for it, less depreciation and impairment, rather than at what it is worth today.
Hockey stick
A forecast where flat or declining history suddenly turns into steep growth, with no mechanism explaining the inflection.
Holding period
How long a sponsor expects to own an asset, which sets the IRR for any given multiple and drives the financing structure chosen.
Horizontal merger
A combination of two companies at the same stage of the same industry, usually direct competitors.
Hostile bid
An offer taken directly to shareholders after the target's board has refused to recommend it.
Hurdle rate
The annual return a fund's investors must receive before the manager takes any share of the profits, conventionally around 8%.
I
Identifiable intangible asset
An intangible recognised separately from goodwill on an acquisition because it is separable or arises from contractual or legal rights.
If converted method
The convention for counting a convertible in diluted earnings per share: assume it converted, add the shares, and add back what it would no longer have paid.
Impairment
A write down of an asset whose carrying value on the balance sheet exceeds what it is actually worth.
Implied cap rate
The yield the share price implies on the portfolio, found by adding net debt back to market capitalisation and dividing net operating income by the result.
Implied cross check
Backing the growth rate out of an exit multiple, or the multiple out of a growth rate, to test whether either is defensible.
Implied exit multiple
The EV/EBITDA multiple a perpetuity growth terminal value is asserting, found by dividing that terminal value by terminal year EBITDA.
Implied multiple
The multiple you get by dividing a value you have just calculated back by its earnings driver, used to test whether the answer is plausible.
Implied rent multiple
The capitalised lease liability expressed as a multiple of annual rent, which decides whether lease capitalisation raises or lowers EV/EBITDA.
Implied terminal growth
The perpetual growth rate an exit multiple is assuming, found by solving the perpetuity formula backwards at your discount rate.
Implied volatility
The volatility figure that makes an option pricing model reproduce the price at which the option actually trades.
In market consolidation
A merger between two operators in the same national market, where one of the two networks can be switched off.
In-tray exercise
A timed simulation of a working inbox, testing what a candidate escalates, delegates and drops when the requests exceed the time available.
Income statement
A record of whether the business made a profit over a period of time.
Incremental cost effectiveness ratio
The extra cost of a new treatment over its comparator, divided by the extra quality adjusted life years it delivers.
Incurrence covenants
Covenants tested only when the borrower takes a specific action, such as raising more debt or paying a dividend.
Indirect method
Preparing the cash flow statement by starting at net income and reversing every place where accrual accounting and cash diverged.
Inflation only floor
The growth rate of a business with no real growth at all, which simply passes through price.
Inside information
Precise, unpublished information relating to an issuer or an instrument that would be likely to have a significant effect on the price if it were made public.
Insider list
The record an issuer and its advisers keep of everyone with access to inside information on a matter, including the date and time each person obtained it.
Installed base
The population of equipment already in the field, which generates service, spares and upgrade revenue independently of new equipment sales.
Insurance float
The premiums an insurer holds between collecting them and paying claims, invested in the meantime for the shareholder's account.
Intention to float
The announcement that a company intends to list, which makes a European IPO public and starts the formal timetable.
Intercreditor agreement
The agreement between a borrower's lender groups setting how they rank against each other and who controls enforcement.
Interest cover ratio
Net rental income divided by net interest, the income side covenant that fails when the cost of debt rises rather than when values fall.
Interest limitation rule
A cap on how much net borrowing cost is deductible, usually around 30% of tax EBITDA, which removes part of the tax shield at high leverage.
Interest tax shield
The tax saved because interest is deductible against taxable profit, which lowers the economic cost of debt without lowering the cash coupon.
Investment grade
The rating band at or above BBB minus, or Baa3, which decides who is permitted to own a borrower's debt.
Investment property
Property held to earn rent or for capital appreciation, which IAS 40 allows to be carried at fair value rather than depreciated cost.
IRR
The annualised compound return on an investment, the primary measure a private equity fund is judged on.
Irrevocable undertaking
A commitment given by a target shareholder directly to a bidder to accept an offer or vote in favour of a scheme.
Issuance window
The stretch of calm conditions during which a new bond or equity deal can realistically be launched and placed.
Iterative calculation
A spreadsheet setting that resolves a circular reference by recalculating the loop repeatedly until the values stop moving.
J
L
Last twelve months
The most recent twelve months of reported performance, built from the last full financial year plus the current stub less the prior year stub.
LBO implied value
The highest price a financial sponsor could pay for a business and still hit its required return, used as a valuation floor.
Lease liability
The present value of future lease payments, recognised on the balance sheet under IFRS 16 alongside a right of use asset.
Letter of intent
A document recording what the parties have agreed so far, almost all of it expressly non binding apart from confidentiality, costs and exclusivity.
Leverage
The amount of debt in a capital structure, usually quoted as a multiple of EBITDA.
Leveraged finance
The business of arranging debt for below investment grade borrowers, principally to fund buyouts and acquisitions.
Levered beta
A company's beta as observed in its share price, reflecting both its business risk and its financial leverage.
Levered free cash flow
Cash left for shareholders after the lenders have been paid, discounted at the cost of equity to give equity value directly.
Liability management exercise
A transaction that reshapes existing debt out of court, ranging from a maturity extension to moving collateral beyond the reach of existing lenders.
LIFO
A cost flow convention that charges the newest inventory cost to cost of sales, permitted under US GAAP and prohibited by IFRS.
LIFO liquidation
The margin distortion that appears when a LIFO reporter sells more units than it buys and eats into old, cheap cost layers.
LIFO reserve
The disclosed cumulative difference between what a US filer's inventory would be under FIFO and what it is under LIFO.
Like for like
Sales growth from stores open in both periods, stripping out the effect of opening or closing space.
Limited partner
An investor in a private equity fund, who commits capital for about a decade, has no say in individual deals, and is buying illiquidity for a higher return.
Liquidation value
What the assets would fetch if the business stopped and was sold off piecemeal, net of wind down costs.
Loan to own
Buying the layer of debt that will be converted into equity in a restructuring, in order to own the reorganised business rather than be repaid by it.
Loan to value
Debt divided by property value, the primary leverage measure in real estate and the one covenants are written against.
Lock up
A contractual restriction stopping insiders selling shares for a period after listing, typically 180 days.
Logo churn
The share of customers lost in a period, counted by customer rather than by revenue.
M
Macro anchor
Deriving terminal growth from long run nominal GDP, the ceiling any perpetual growth rate has to sit under.
Maintenance capex
The capital spending needed to keep the existing asset base producing what it produces today, as opposed to spending that adds capacity.
Maintenance covenants
Covenants tested at regular intervals regardless of whether the borrower does anything, typically a leverage or coverage ratio.
Make whole
A redemption price equal to the present value of all remaining payments, discounted at a government yield plus a small spread.
Management fee
The annual fee a fund's investors pay its manager, charged on committed capital during the investment period and on invested capital afterwards.
Management incentive plan
A slice of a buyout's fully diluted equity reserved for the management team, vesting on time served and on returns achieved.
Management overlay
A manual addition to a bank's modelled expected credit loss provision, made where management believes the model misses a risk that is real.
Management presentations
Sessions where the target's management present the business to shortlisted bidders and take questions.
Mandatory amortisation
The scheduled principal repayments a credit agreement requires, which reduce cash available to shareholders whether or not the business can spare it.
Mandatory convertible
An instrument that converts into shares at maturity whether the holder wants it to or not, so it counts as equity from the start.
Mandatory offer
Under the UK Takeover Code, the obligation to bid for the whole company in cash once a shareholding crosses 30%.
Margin ratchet
A pricing grid stepping the loan margin down as leverage falls, so the cost of the debt drops as the borrower delevers.
Marginal tax rate
The rate charged on the next unit of profit, normally the statutory rate where that profit arises.
Market flex
The arrangers' right to change pricing and some terms, within agreed caps, if the debt does not clear syndication as proposed.
Market sizing
Estimating the size of a market from first principles, assessed on the structure of the estimate rather than its accuracy.
Market value of debt
What a company's borrowings actually trade at, which can differ sharply from the book value used in a routine bridge.
Matching rights
The original buyer's contractual right to revise its offer to match a competing proposal before the board may terminate.
Material adverse change
A contractual right for a buyer not to complete if something sufficiently bad and sufficiently specific happens to the target between signing and completion.
Maximum distributable amount
The automatic cap on dividends, buybacks, additional tier 1 coupons and bonuses that applies once a bank falls into its combined buffer.
Merger model
A model combining acquirer and target financials to work out what the deal does to the acquirer's earnings per share.
Merger of equals
An all share combination of two similarly sized companies, presented as a coming together rather than a purchase and struck at little or no premium.
Mezzanine
Junior, usually unsecured debt sitting between senior lending and equity, often carrying PIK interest and warrants.
Mid market advisory
Advisory work on transactions below the size that occupies the largest firms, where a junior touches the whole process rather than one workstream.
Mid year convention
Discounting each year's cash flow from the middle of the year rather than the end, since cash arrives throughout.
Mini case
A short business problem given in an interview, assessed on structure and judgement rather than on reaching a correct answer.
Minimum cash balance
The cash level a model holds the business at, below which the revolver is drawn rather than letting the balance fall further.
Minimum operating cash
The cash a business needs on hand to run, which is not legally restricted but is not surplus either.
Minority discount
A reduction applied when moving from a control basis value to the value of a stake that cannot direct the business.
Modelling test
A timed build from an information pack, marking method and judgement rather than only the final number.
MOIC
Total value returned divided by total invested, ignoring how long it took.
Monitoring fee
An annual fee a sponsor charges its own portfolio company for board and strategic support, paid by the company rather than by the fund's investors.
Multiple arbitrage
Buying earnings at a lower multiple than the one they will be valued at inside a larger platform, which is a mechanism rather than a bet on the market.
Multiple expansion
Selling a business at a higher multiple than was paid for it, the least controllable source of buyout return.
N
Natural frequencies
Working a probability problem by counting people out of a round population instead of multiplying decimals together.
Natural hedge
Matching the currency of costs, or of borrowings, to the currency of revenue so an exchange rate move offsets itself without a derivative.
NAV per share
Property value less net debt, divided by diluted shares, and the figure a listed property share price is quoted against.
Negative enterprise value
The result when cash exceeds market capitalisation plus debt, implying the market values the operations at less than nothing.
Negative working capital
A working capital balance where operating liabilities exceed operating assets, so growth releases cash instead of consuming it.
Net debt
Gross borrowings less cash, used as shorthand for the financing claim that sits between enterprise value and equity value.
Net income
The profit left for equity holders after every cost, including interest and tax.
Net interest income
Interest earned on a bank's assets less interest paid on its funding, the largest revenue line for most banks.
Net interest margin
The spread a bank earns between what it receives on assets and pays on funding, measured against interest earning assets.
Net investment hedge
Designating a foreign currency liability or derivative as a hedge of the net assets of a foreign operation, so the two offset within equity.
Net operating income
Rent collected less the property costs a landlord bears and cannot recharge, the income figure every real estate yield is built on.
Net operating loss
A loss computed under the tax rules that a company can carry forward to reduce the tax payable on future profits.
Net operating profit after tax
EBIT taxed as if the company had no debt, the starting point for unlevered cash flow.
Net realisable value
The estimated selling price of inventory less the costs still to be incurred to complete and sell it, and the ceiling IAS 2 places on its carrying value.
Net revenue retention
What last year's customer cohort spends this year, after churn and after upgrades, expressed as a percentage.
Network effects
When a product becomes more valuable to each user as more people use it, creating self reinforcing advantage.
New money
Fresh cash provided to a distressed company, usually ranking ahead of the existing debt and usually carrying most of the reorganised equity.
Nil paid rights
The tradeable entitlement to subscribe for new shares in a rights issue, before the subscription price has been paid.
No shop
A covenant preventing the target from soliciting other buyers once a deal is signed, subject to a fiduciary out for unsolicited approaches.
Nominal spread
A bond's yield to maturity less the yield on one government bond of similar maturity, the crudest of the spread measures.
Non binding indications of interest
The first round submission: a price range with no commitment, used to select who proceeds.
Non controlling interests
The portion of a consolidated subsidiary the parent does not own, added back when bridging to enterprise value.
Non disclosure agreement
The agreement binding a prospective bidder to keep information confidential and use it only to evaluate the transaction.
Non-cash charge
A cost recognised in profit where no cash left the business in that period, added back when building cash flow.
Non-operating item
A gain or cost reported below operating profit that does not describe the trading business being forecast.
Non-recourse
Debt whose lenders can claim only against the borrower and its security, so a failed buyout costs the sponsor its equity cheque and nothing beyond it.
Non-target university
A university where a firm runs no formal recruiting presence, which changes how a candidate gets access rather than the standard they are held to.
Normalisation
Stripping one off and non recurring items out of earnings so a multiple reflects the ongoing business.
Notching
Rating an individual instrument above or below the issuer rating to reflect where it ranks and what security it has.
Notified body
A private organisation designated by an EU member state to assess whether a medical device conforms to the requirements for a CE mark.
O
Off balance sheet
An obligation or exposure that is real but does not appear in the balance sheet totals, showing up in the notes instead.
Off-cycle internship
An internship of roughly three to six months taken outside the summer window, and a primary analyst entry route in continental Europe.
Offer related arrangement
Any agreement between a UK target and a bidder in connection with an offer, prohibited by Rule 21.2 of the Takeover Code except with the Panel's consent.
One stop shop
The principle that a concentration meeting the EU Merger Regulation thresholds is reviewed once by the European Commission for the whole EEA.
Online penetration
Online sales as a share of group sales, and the mix metric whose definition quietly determines what a retailer's like for like figure means.
Opening balance sheet
The combined balance sheet as at completion, built by recognising the acquired assets and liabilities at fair value and eliminating the target's own equity.
Operating asset
An asset the business uses to generate its operating profit, as opposed to a financial one.
Operating free cash flow
EBITDA less capital expenditure, the standard sector measure of what a capital intensive business actually generates.
Operating leverage
The degree to which fixed costs amplify the effect of a revenue change on profit.
Operating liability
A liability that arises from running the business rather than from financing it, such as payables or accruals.
Operating working capital
The operating current assets a business ties up, less the operating current liabilities that fund it.
Option adjusted spread
The spread left once the value of a bond's embedded options has been removed, so it compensates for credit and liquidity alone.
Option to abandon
The right to stop or exit a project when it turns out badly, which puts a floor under the downside a committed forecast assumes you have to bear.
Option to expand
The right to commit further capital later if a first phase works, which is why a phased rollout is worth more than the same project committed in full.
Order of magnitude check
Testing an answer against a quantity you already know independently, to catch errors of scale rather than errors of detail.
Original issue discount
A loan or bond sold below par, so the lender earns the difference on top of the coupon without the headline rate changing.
Other comprehensive income
Gains and losses that IFRS requires to bypass profit and go straight to a reserve within equity.
Over the counter
Traded directly between two parties rather than on an exchange, so terms are negotiated and the credit risk runs to the counterparty.
Overlap band
The part of a football field that more than one method supports, and the range a standalone recommendation should normally be drawn from.
P
Paper LBO
A simplified buyout calculation done by hand in an interview, from entry assumptions to an approximate return.
Patent cliff
The abrupt collapse in a drug's revenue when its patent expires and generic competition enters.
Payment in kind
Interest added to the principal balance rather than paid in cash, preserving liquidity at the cost of a larger repayment.
Peak working capital
The highest level of working capital a seasonal business carries during the year, which the year end balance sheet usually does not show.
Pension deficit
The excess of a defined benefit obligation over the assets held in the plan, treated as debt like in the bridge.
Permanent difference
An item that enters book profit or taxable profit but never the other, so no deferred tax arises and the gap never reverses.
Perpetuity growth method
Calculating terminal value by assuming the final year cash flow grows forever at a constant modest rate.
Pitchbook
The presentation a bank uses to win a mandate, setting out its credentials, a market view, a valuation and a proposed process.
Plug
A figure inserted to force a statement or model to balance, rather than one derived from the underlying mechanics.
Poison pill
A US defence letting a target flood the market with discounted shares once a bidder crosses a threshold, making the stake prohibitively dilutive.
Policy rate
The interest rate a central bank sets to steer the economy, and the anchor under every other rate in that currency.
Portability
A provision letting existing debt survive a change of control instead of falling due, usually subject to a leverage test.
Pre-emption rights
The right of an existing shareholder to be offered new shares first, in proportion to what they already hold.
Precedent transactions
Valuing a company against the multiples acquirers actually paid to buy similar businesses outright.
Premiums paid analysis
A study of the premiums acquirers have offered over targets' undisturbed prices in comparable deals, used to frame what a board should expect.
Preparation phase
The four to eight weeks before a sale process launches, when the equity story, materials and buyer list are built.
Price deck
The set of commodity price assumptions used across the forecast in a resource valuation, usually the forward curve near term and a long run assumption beyond it.
Pricing power
The ability to raise prices in line with costs without losing enough volume to make the increase self defeating.
Private label
A retailer's own brand, manufactured to its specification, sold alongside and against the branded products in the same category.
Private placement
A sale of securities to a small number of selected institutions rather than to the public, relying on an exemption from prospectus or registration requirements.
Pro forma ownership split
The percentage of the combined company each shareholder base holds once the new shares have been issued.
Probability weighted valuation
Valuing each discrete outcome separately and weighting the results by the chance of each, rather than discounting one blended forecast.
Process letter
The seller's instructions to bidders setting out what to submit, in what form, and by when.
Product team
A team organised by transaction type that owns the mechanics of one kind of deal across every sector.
Prospectus
The legally reviewed disclosure document for a public offering, setting out the business, financials and risks.
Proved and probable reserves
Hydrocarbon volumes classified by confidence of recovery, where 2P adds probable to proved and is the usual basis for a European net asset value.
Provision
A liability recognised for an obligation that is probable and estimable, but whose exact amount or timing is uncertain.
Purchase accounting
The rules that rebuild an acquired business on the buyer's balance sheet at fair value, and the earnings consequences that follow from doing so.
Purchase price allocation
The exercise of spreading the price paid for a business across its identifiable assets and liabilities at fair value, with the remainder becoming goodwill.
Purchasing power parity
The proposition that a currency with higher expected inflation should weaken against one with lower expected inflation, by roughly the difference.
Pure play peer
A listed company whose value is driven by the same single business as the target's, with no material unrelated activities attached.
Put option
The right, and not the obligation, to sell something at a fixed price up to an agreed date.
Put up or shut up
The UK rule forcing a named potential bidder to announce a firm offer or walk away within 28 days.
Q
Quality adjusted life year
A unit of health combining how much longer a treatment lets a patient live with how well they live during that time.
Quality of earnings
A diligence exercise that rebuilds the bridge from reported profit to a defensible EBITDA and tests every adjustment against the underlying records.
R
Real options
The rights management holds over a physical asset or business, to abandon, expand or delay, which a single path DCF values at zero.
Recoverable amount
Under IAS 36, the higher of an asset's fair value less costs of disposal and its value in use, and the figure its carrying amount is tested against.
Regulatory exclusivity
Protection from competition granted by a medicines regulator, running separately from patent protection.
Reinvestment rate
The share of after tax operating profit a company puts back into the business to fund growth.
Relative contribution analysis
A table setting each side's share of the combined company's metrics against the ownership share the proposed exchange ratio would give it.
Relative priority rule
A cram down test requiring a dissenting class to be treated at least as well as classes of the same rank and better than those below it, without requiring it to be paid in full.
Relevant alternative
Whatever the court considers most likely to happen if a restructuring plan is not sanctioned, and the benchmark every dissenting class is measured against.
Relief from royalty
Valuing an intangible as the stream of royalties the business would have had to pay had it licensed the asset from somebody else.
Remaining performance obligations
The transaction price allocated to contracted goods and services not yet delivered, disclosed under IFRS 15.
Representations and warranties
Statements of fact about the business given by the seller, which give the buyer a claim if they turn out to be untrue.
Reserve life index
Reserves divided by annual production, giving the number of years the current production rate could be sustained from volumes already identified.
Reserve replacement ratio
Reserves added during a year divided by production in the same year, showing whether the resource base grew or was consumed.
Residual income model
Valuing a bank as its book value plus the present value of returns earned above the cost of equity.
Restricted cash
Cash the company is not free to spend, which therefore cannot be netted against debt in the bridge.
Restricted payments basket
The credit agreement capacity permitting distributions to shareholders, and the covenant a dividend recapitalisation has to fit inside.
Restructuring plan
The Part 26A procedure introduced by the Corporate Insolvency and Governance Act 2020, which keeps the scheme's class voting and adds the power to bind an entire dissenting class.
Retained earnings
The running total of all profit the company has ever earned and not paid out as dividends.
Return on invested capital
After tax operating profit divided by the capital employed to produce it, the cleanest measure of whether a business creates value.
Returns bridge
An attribution of the equity gain in a buyout across EBITDA growth, multiple change and debt paydown.
Revenue synergies
Additional sales expected from combining two businesses, typically cross selling, which banks discount heavily.
Revlon duties
The Delaware doctrine that once a sale or change of control becomes inevitable, a board's duty shifts to obtaining the best value reasonably available.
Revolver
A credit line a company can draw, repay and redraw as needed, used to fund working capital swings.
Right of use asset
The capitalised right to use a leased asset over the lease term, recognised opposite the lease liability.
Rights issue
An offer letting existing shareholders buy new shares at a discount, in proportion to what they already hold.
Risk adjusted NPV
A drug programme's DCF multiplied by the probability it actually reaches market.
Risk weighted assets
A bank's assets scaled by their riskiness, forming the denominator of regulatory capital ratios.
Roadshow
The marketing period in which management presents the equity story directly to institutional investors ahead of pricing.
Rolling hedge
Keeping cover continuous by adding a contract at the far end as the nearest expires, so the hedged rate keeps refreshing at the market of the day.
Rolling recruitment
Assessing applications as they arrive and filling places continuously, rather than allocating them all at the closing date.
Rule of 40
A software heuristic that revenue growth plus operating margin should exceed 40.
Rule of 72
A mental shortcut: divide 72 by a growth rate to get the number of years an amount takes to double.
Run rate
Scaling a partial period up to a full year, for example multiplying a quarter by four, to put a figure on a comparable annual basis.
S
Sale and purchase agreement
The contract governing the transaction: what is being sold, for how much, on what promises, and what happens between signing and completion.
Sanity check
A test of an output that reaches the answer by a route independent of the calculation that produced it.
Scheme of arrangement
A court sanctioned compromise between a company and a class of its creditors or members under Part 26 of the Companies Act 2006, binding dissenters inside an approving class.
Second lien
Debt secured on the same collateral as the senior loans but ranking behind them in enforcement and repayment.
Second round
The stage where shortlisted bidders get full diligence access and are asked for binding offers.
Secondary buyout
The sale of a portfolio company by one private equity firm to another, rather than to a corporate buyer or the public market.
Section 382
The US rule capping how much of an acquired company's tax losses may be used each year after an ownership change.
Sell side mandate
An engagement in which the bank acts for the seller: preparing the business, approaching buyers, running the process and negotiating the terms.
Selling concession
The part of an underwriting spread paid on shares each bank actually places, and conventionally the largest of its three components.
Senior secured notes
Bonds secured on the borrower's assets, carrying a fixed coupon, incurrence covenants and a non call period rather than free prepayment.
Share based compensation
Employee pay settled in equity rather than cash, expensed in the accounts and dilutive to existing shareholders.
Share buyback
A company purchasing its own shares in the market and then cancelling them or holding them in treasury.
Single lease cost
The one straight line operating expense a US GAAP operating lease produces under ASC 842, which keeps rent above EBITDA.
Single Supervisory Mechanism
The framework under which the ECB directly supervises the significant banks of participating member states, with national authorities supervising the rest.
Situation, task, action, result
A structure for behavioural answers: set the context, state what was at stake, describe what you did, and give the outcome.
Situational judgement test
A screening test presenting workplace dilemmas and asking what you would do, measuring alignment with how a firm expects juniors to behave.
Size premium
An increment added to a CAPM cost of equity for smaller companies, justified by returns that beta alone did not explain.
Sources and uses
The table showing where every euro funding a transaction comes from and exactly what it pays for. The two sides must be equal.
Sovereign default spread
The extra yield a government pays over a benchmark issuer of similar maturity, taken as the market's price for the risk it does not pay.
Special dividend
A one off distribution paid to one company's own shareholders before a combination completes, so that the value distributed stays out of the exchange ratio.
Spectrum licence
A time limited state granted right to transmit on a band of radio frequency, normally awarded by national auction.
Spin-off
A separation in which the parent distributes shares in a division to its own shareholders pro rata, receiving no cash.
Spring week
A short UK insight programme for first year students, functioning mainly as a pipeline into the following summer internship.
Springing covenant
A financial test that applies only once a condition is met, typically when revolver drawings pass a stated threshold.
Squeeze out
The statutory mechanism letting a bidder that has acquired most of a company force the last minority holders to sell.
Staffer
The mid level banker who allocates juniors across live mandates and pitches, and the route through which a junior's reputation compounds.
Standalone cost base
What a carved out business will genuinely spend running itself, as opposed to the central overhead its parent allocated to it.
Standalone value
What a business is worth run as it is, by its current owners, before any acquirer's synergies or plans are added to it.
Standing investment
A property that is already built and let, producing income from day one, as opposed to a development that consumes capital and produces nothing.
Standstill period
The period after a junior default during which a junior creditor is contractually barred from accelerating or enforcing.
StaRUG
The German preventive restructuring framework, available before insolvency, applying an absolute priority rule and unable to touch employee or pension claims.
Stated assumption
An assumption said out loud with a value, a reason and the direction it moves the answer, so the interviewer can correct it.
Steady state
The condition a business must reach by the end of the forecast: stable growth, stable margin, and reinvestment consistent with both.
Stranded costs
Central costs that supported a divested business and remain with the seller after it goes, now spread over a smaller revenue base.
Strategic buyer
An operating company acquiring a business in or adjacent to its own industry, buying the combined entity rather than the target alone.
Strike price
The fixed price at which an option's holder may buy or sell the underlying. Exercise price means the same thing.
Structural subordination
Ranking behind another creditor because of where in a group your borrower sits, rather than because of anything either of you agreed.
Stub period
The part year between a company's last financial year end and its most recent reporting date, used to roll a full year figure forward.
Success fee
The part of an advisory fee payable only if the transaction completes, and the large majority of what an adviser earns on a mandate.
Sufficient connection
The jurisdictional threshold an English court applies before sanctioning a scheme or plan for a company incorporated elsewhere.
Sum of the parts
Valuing a diversified business by valuing each division separately on its own appropriate method, then adding them together.
Super senior revolving facility
A working capital line secured on the same collateral as senior secured notes but paid ahead of them out of enforcement proceeds.
Supply chain finance
An arrangement where a bank pays a company's suppliers early and is repaid later, which is borrowing presented inside trade payables.
Suspensory regime
A merger control regime that forbids completing the transaction until the authority has cleared it.
Sweet equity
The thin, highly geared strip of ordinary shares management subscribes for in a European buyout, sitting behind the sponsor's loan notes.
Switching costs
The cost, in money, time or risk, a customer bears to move to a competitor, which protects incumbent pricing.
Synergies
The value created by combining two businesses that neither could produce alone, split into cost and revenue.
Synthetic credit rating
A cost of debt estimated by mapping a coverage ratio to a rating band and that band to a spread, used where no bond trades.
T
Teaser
A one or two page anonymised summary of the opportunity, sent to screen interest before any name is disclosed.
Temporary difference
A gap between the carrying amount of an item in the accounts and its tax base that will reverse in a later period.
Tender offer
An offer made directly to shareholders to buy their shares, which they accept individually.
Term loan A
The amortising senior tranche held by relationship banks, repaying on a fixed schedule across its life rather than at maturity.
Term loan B
The main institutional tranche in a buyout financing: senior secured, floating rate, and repaid mostly at maturity.
Terminal value
The value of all cash flows beyond the explicit forecast period, which usually dominates a DCF.
Terminal value share
The proportion of total enterprise value contributed by the discounted terminal value, and a diagnostic that is meaningless without the forecast length attached.
Theoretical ex rights price
The value of one share after a rights issue, taken as the whole company including the new cash divided by all the shares afterwards.
Three statement model
A forecast in which the income statement, cash flow statement and balance sheet are linked, so one assumption moves everything it should.
Through the cycle margin
The average margin a cyclical business earns across a full peak to trough cycle, used in place of whatever the current year happens to produce.
Time value
The part of an option's price above its intrinsic value, paying for the chance the underlying moves further before expiry.
Top down
Forecasting revenue by starting from the size of the market and working down to the company's share of it.
Trading comparables
Valuing a company against the multiples at which similar listed businesses currently trade.
Transaction effect
The real margin impact of buying or selling in a currency different from the one costs are incurred in.
Transaction exposure
The risk that a currency move changes real margin and cash, because a business sells in one currency and pays its costs in another.
Transitional services agreement
The contract under which a seller keeps providing shared services to a carved out business for a defined period after completion.
Translation effect
The impact on reported results of converting foreign subsidiary figures into the parent's reporting currency.
Translation exposure
The risk that converting a foreign subsidiary's results and net assets into the group's presentation currency moves the reported figures without any cash moving.
Treasury stock method
The convention for counting in the money options: assume exercise, assume the proceeds buy shares back, and count only the difference.
Trend based
Forecasting by extrapolating historic growth rates or margins forward, with no explicit operational build.
Triangulation
Reaching a valuation conclusion by independent routes, so that agreement between methods counts as evidence rather than as construction.
U
Underwriting
A bank taking securities onto its own book and reselling them, so the issuer's proceeds are certain and the placement risk sits with the bank.
Undisturbed price
A target's share price before any leak, rumour or approach moved it, used as the reference point for measuring an offer premium.
Unitranche
A single blended debt facility replacing separate senior and subordinated tranches, usually provided by a private credit fund.
Unlevered cost of equity
The return equity holders would require if the business carried no debt, used as the discount rate in an APV analysis.
Unlevered free cash flow
Cash generated by the operations before any financing, available to all providers of capital.
Unlevering and relevering
Stripping leverage out of peer betas and adding it back at your target's capital structure, so business risk is compared like for like.
Unrealised fair value movement
The change in carrying value of an item marked to market, recognised before anything has been bought or sold.
Useful economic life
The period over which an asset is expected to be used, which sets the annual depreciation charge and how fast its cost runs through profit.
V
Valuation allowance
A write down against a deferred tax asset where it is not probable the company will earn enough profit to use it.
Value in use
The present value of the cash flows expected from an asset in its current condition, computed under IAS 36 rules that differ from a deal DCF.
Variable costs
Costs that move roughly in proportion to volume.
Variation margin
The daily cash settlement of a derivative position, which turns a paper loss into money that has to be paid today.
Vendor due diligence
Diligence commissioned by the seller on its own business, delivered as a report bidders are permitted to rely on.
Vendor loan note
Deferred consideration where the seller effectively lends part of the price back to the buyer.
Vertical merger
A combination of companies at different stages of the same supply chain, such as a manufacturer buying its supplier.
Video interview
A recorded, one way interview screening motivation and communication with no interviewer present to react to.
W
WACC
The blended cost of a company's debt and equity, weighted by their market values, used to discount unlevered cash flows.
Walk away right
A target board's right to terminate a share deal if the acquirer's shares fall below a stated level before completion, unless the acquirer tops up the consideration.
Wall crossing
Deliberately putting someone in possession of inside information under a recorded procedure, after they have consented to receive it.
Warranty and indemnity insurance
A policy covering loss from a breach of the seller's warranties, so the buyer claims against an insurer rather than against the seller.
Wash-up meeting
The meeting at the end of an assessment centre where assessors pool their recorded evidence on every candidate and reach a decision.
Waterfall
The contractual order in which cash or recoveries are distributed among claimants, each rank paid in full before the next.
Weighted average cost
The IFRS permitted inventory convention that blends every purchase into a single average cost per unit.
White knight
A friendly bidder a target invites to make a competing offer against a hostile approach.
WHOA
The Dutch preventive restructuring procedure, offering class voting and cross class cram down in either a public or a confidential route.
Winner's curse
In an auction for a commonly valued asset, the winner is the most optimistic bidder and therefore tends to overpay.
Working capital intensity
Net working capital expressed as a percentage of revenue, used to check that a working capital forecast is behaving.
Working language
The language an office conducts its client work in, which is frequently not the language its models and internal papers are written in.
Works council
An elected employee body with legal rights to be informed and consulted about decisions affecting the workforce, including a sale of the business.
Works council consultation
The obligation in much of continental Europe to inform and consult employee representatives before taking a binding decision to sell a business.
Written exercise
A timed task at a final stage: read a short pack and produce a recommendation, note or summary that will be marked on judgement rather than length.
Y
Yield curve
The plot of government bond yields against maturity, and the market's summary view of growth and rates.
Yield on cost
Stabilised net operating income divided by total development cost, compared against the market cap rate to measure development profit.
Yield to maturity
The return an investor earns buying a bond at today's price and holding it to maturity, counting coupons and the pull back to par.
Yield to worst
The lowest yield a bond can produce across its scheduled redemption dates, and the honest number whenever the issuer holds the option.