Keene Advisors’ Glossary of Financial Terms
A curated glossary of financial terms commonly used in M&A, credit facilities, private equity, and corporate finance, to help business owners, CEOs, CFOs understand complex deal terminology.
Adjusted EBITDA
EBITDA modified for one-time, non-recurring, or non-operational items to better reflect ongoing profitability.
Add-Backs
Adjustments made to EBITDA for expenses that are not expected to recur after a transaction, used to normalize earnings.
Business Valuation
The process of determining the economic value of a business or company. It is commonly used in mergers and acquisitions (M&A), succession planning, and strategic decision-making. Valuation methods include income-based approaches like discounted cash flow, market-based approaches using comparable multiples, and asset-based methods.
Buyer Universe
The total pool of strategic and financial buyers who might have interest in acquiring a given company.
Capital Expenditures (CapEx)
Money spent by a business on long-term assets such as equipment or buildings.
Capital Stack
The hierarchy of capital used to finance a company, typically including senior debt, mezzanine debt, and equity.
CIM or CIP: Confidential Information Memorandum / Presentation
A detailed document shared with serious buyers outlining the company’s operations, financials, and growth plan.
Credit Facility
A type of loan agreement between a borrower and a lender that allows the borrower to draw funds as needed up to a maximum limit.
Data Room
A secure online repository where confidential deal documents are stored and shared during due diligence.
Deal Structure
The framework of how a transaction is financed and executed, including payment terms, equity rollover, earn-outs, etc.
Deferred Consideration
A portion of the purchase price that is paid in the future, often tied to milestones or escrow terms.
Drag-Along Rights
Rights that allow majority shareholders to force minority shareholders to sell their shares if a sale is approved.
DSCR (Debt Service Coverage Ratio)
A ratio used by lenders to evaluate a company's ability to repay debt; calculated as net operating income divided by total debt service.
Due Diligence
A thorough investigation and analysis of a target company’s financial, legal, and operational health before a deal closes.
Earn-Out
A payment structure where part of the purchase price is contingent on the target company hitting future performance milestones.
Enterprise Value (EV)
The total value of a business, including equity and debt, minus cash; used in valuation metrics like EV/EBITDA.
Equity Rollover
When a seller retains a portion of ownership in the business after a transaction, typically in private equity deals.
Fairness Opinion
An independent financial assessment that the terms of a transaction are fair to shareholders.
FCCR (Fixed Charge Coverage Ratio)
A financial ratio that measures a company's ability to cover fixed charges, such as interest and lease payments, with operating income.
Financial Buyer
A buyer, often a PE firm, acquiring a company primarily for investment return rather than operational synergies.
Indication of Interest (IOI)
An early-stage, non-binding offer from a buyer that expresses serious interest and outlines initial deal terms.
Investment Banker
A financial advisor who facilitates M&A transactions, valuations, and various types of capital raising for clients.
Leverage Ratio
Any ratio that measures the level of debt relative to equity or earnings, commonly Debt/EBITDA.
Letter of Intent (LOI)
A non-binding document outlining key terms and intentions before a formal agreement is reached in an M&A deal.
Loan Covenant
A condition or requirement in a loan agreement that the borrower must comply with to maintain the terms of the loan.
Management Presentation
A formal overview of the business given by the company’s leadership to potential buyers or investors during diligence.
Multiple Arbitrage
The concept of acquiring a company at a lower multiple and growing it or integrating it to command a higher multiple at exit.
Post-Close Integration
The process of merging systems, teams, and operations after an acquisition is finalized.
Private Equity
Investments made in private companies by capital management (PE) firms, typically involving ownership control and active management.
Purchase Agreement (APA/SPA)
The final, binding contract that outlines the definitive terms and conditions of a business sale.
Quality of Earnings (QoE)
A report used in M&A due diligence to validate the accuracy and sustainability of a company’s earnings.
Recurring Revenue
Predictable revenue that a company expects to continue in the future, often from subscriptions or contracts.
Refinancing
Replacing an existing debt with new debt, usually to secure better terms, lower interest rates, or extend maturity.
Reps and Warranties
Contractual statements of fact made by the seller in an M&A transaction, with potential liability if breached.
Run Rate
A projection of future financial performance based on current performance metrics.
Senior Debt
Debt that has priority over other unsecured or subordinated debt in case of liquidation.
Strategic Buyer
A company acquiring another business for long-term strategic reasons, such as synergies or market entry.
Subordinated Debt
Debt that ranks below senior debt in terms of claims on assets in the event of a default or liquidation.
Syndicated Loan
A large loan provided by a group of lenders (a syndicate) that is structured and arranged by one or more lead banks.
Tag-Along Rights
Rights that allow minority shareholders to join in on a sale initiated by majority shareholders.
Teaser
A one-page overview of a company for sale, distributed to potential buyers to gauge interest while keeping the company name and identifying details confidential.
Working Capital
The difference between current assets and current liabilities, indicating short-term liquidity.