Glossary M&A

Technical terms for FBA sellers, dropshippers, marketplace merchants, online stores and retailers explained simply

Lucky Flippers helps you explain the technical terms of a business sale.

In our glossary you will find the most important terms easily explained.

  • Acquisition: Purchase of another company, store or brand
  • Asset-and-Purchase Agreement: APA for short. The APA is the contract for the sale of fixed and current assets such as inventory, registered trademarks, a web presence, or the like.
  • Asset deal: The purchase of assets without company shares. Is regulated in an APA
  • Business transfer: Refers to the change of ownership of a business.
  • Buy-and-hold: A strategic orientation in which a buyer acquires a business and keeps it without having the intention of reselling the business at the time of purchase.
  • Buy-and-sell: A strategic orientation in which a buyer acquires businesses in order to make the operation more profitable and then sell it for a profit
  • Clean Exit: A clean exit from your business by paying a one-time sum with no post-closing adjustments
  • Closing Day: The day when the closing conditions are met and the buyer becomes the new owner of the business
  • Closing condition: The requirements for a deal to actually close. The closing conditions are defined in the SPA or APA
  • Deal Breaker: Solid reasons for the seller or buyer to end negotiations
  • Debt-Free-Cash-Free (DCFC): A sale price applies to a mutually agreed upon level of cash as well as debt of a sold business. A DCFC is almost always agreed in conjunction with a working capital adjustment
  • Direct approach: The direct approach of potential buyers.
  • Discounted cash flow (DCF) method: The DCF is used to value companies for sale. In practice, DCF has hardly played a role for e-commerce companies to date.
  • Due Diligence (DD): The English term due diligence means “due diligence”. DD is the examination of a company for strengths and weaknesses. A DD is initiated by the prospective buyer in order to determine the opportunities and risks of a company purchase as well as the final purchase price. Lawyers, tax advisors and M&A consultants are often involved in a DD. For the DD, a prospective buyer will, among other things, be allowed to view your seller accounts as well as your profit and loss statements per month.
  • Earn-Out or Earn-Up: Participation in the company’s success after the sale of the company. The earn-out is a component of the sales price and is a post-closing adjustment.
  • Earn-Out: Participation in the company’s success after the sale of the company. The earn-out is a component of the selling price and is therefore a post-closing adjustment.
  • EBITDA: Abbreviation for Earns before Interests, Taxes, Depreciation and Amortization. In German: Gewinn vor Abzug von Zinsaufwendungen, Steuern sowie Abschreibungen. A standard key figure in the valuation of companies. In other words, EBITDA is the operating result
  • Escrow: In an escrow, a portion of the sale price is deposited in an escrow account with a notary public for a specified period of time before the amount is paid to the seller. An escrow amount should not exceed 10% of a sale price. An escrow is a security for the buyer, who is allowed to settle possible damages or disadvantages from the purchase euro by euro. An escrow is a potential risk for a seller to reduce the total selling price
  • Exit: The exit from a company through sale. Company shares or a seller account including the trademark rights and possibly the inventory are sold.
  • Finding: Term for a significant discovery in a due diligence process. A significant discovery can change the course of a transaction or influence the sales price upwards or downwards.
  • Funds: PE funds
  • Closed: New German for a deal that has closed
  • Buyer: A company interested in buying an online business
  • Consolidator: Companies specializing in buying up e-commerce businesses, usually FBA sellers
  • Controlled Bidding or Limited Auction: In the case of business sales, this is referred to as a controlled bidding process. The English term limited auction is also often used. In a controlled bidding process, the seller or his M&A advisor offers the company to a large group of bidders. The group of investors is gradually narrowed down in the course of the process until the purchase agreement is finally concluded with a selected bidder
  • Locked Box: From the signing day until the closing day, the company for sale becomes a locked box. Even if the seller is still the owner of a company until the signing day, the owner is no longer allowed to make agreed decisions or expenditures. The Locked Box enables a Clean Exit
  • M&A Advisors: advisors and their teams who assist sellers or buyers in the sale of a business.
  • M&A: Stands for “Mergers & Acquisitions,” which means “mergers and acquisitions.” M&A is the collective term for company sales and acquisitions of all kinds
  • Marketplace: Open platforms on which traders offer their businesses. On these platforms, owners conduct their business sales on their own. Many platforms are not curated and sellers must rely on their own negotiating skills when selling.
  • Multiple: In German, multiplier. The multiple is a factor in calculating the sale price. Often the multiple is multiplied by the EBITDA minus the SDE to determine a selling price. The amount of the multiple is based on the value of a company to the seller. The multiple is often the subject of negotiations between seller and buyer
  • Multiples method: The standard method for valuing e-commerce retailers.
  • PE, PE fund, PE company: Private equity companies (capital investment companies)
  • Post-closing adjustment: changes in the selling price after the closing. Post-closing adjustments include earn-outs, earn-ups, working capital adjustments in conjunction with a debt-free cash-free clause.
  • Post-merger integration (PMI): PMI is the time during which a buyer integrates the acquisition target into its organizational structures
  • Sale-and-Purchase Agreement: Abbreviated as SPA. The SPA is the contract for the sale of company shares
  • Seller’s Discret Earning (SDE): The SDE is the sum of your gross salary plus bonuses or special payments for the owner as well as for other expenses for your work like company cars. The SDE is deducted when calculating the company’s profit. This increases the selling price of the company
  • Seller: The owner or shareholder of a business or brand
  • Share deal: The sale of company shares. By acquiring the shares in the company, a buyer acquires all the assets and all the contractual obligations of the purchased company. A share deal is in contrast to an asset deal
  • Signing Day: The day on which all parties have signed an SPA or APA.
  • Trailing Twelve Month (TTM): The TTM is the financials for the most recently completed twelve months, regardless of the fiscal year
  • Transaction or Deal: Another term for a sale of a business.
  • Working Capital Adjustment: Working capital describes the net working capital of a business. This clause is used to co-purchase a company’s working capital. A working capital adjustment can result in the buyer having to pay more on the closing day if the working capital is high. If the working capital is lower than agreed, the buyer may reduce the purchase price. A working capital adjustment is a post-closing adjustment.
  • Working capital: Net current assets of a company. Working capital describes the net current assets required for ongoing operations. This includes cash and account balances as well as payment service credit balances and, of course, inventories of goods

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