Resources > Seller's Glossary

This Glossary is created to assist you, the seller, with terms and definitions that need to be understood prior to selling your company.

Addback
The adjustment to historically reported financial statement to present a realistic snapshot of a business' profitability - usually prepared for a potential buyer to estimate a true value of a company. Addbacks are sometimes one time expenses or anomalies on a financial report.

Amalgamation
A blending or merging of two or more companies.

Asset Business Purchase
Acquirer may purchase only assets (and in some cases, not all assets) but will not purchase the liabilities of the company.

Bottom Line
The net income number or the net income "line" of the income statement.

Business Valuation
Procedure used to determine the value of a business. There are many techniques and formulas available to calculate this value. Many valuations include several formulas with the conclusion being an average value.

Consolidation
The fusion of two companies in which both loose their identity and form a new company. Shareholders are issued shares of the new company.

Continuing Operations
Term used in an income statement to denote recurring income as opposed to income generated by sales of assets or discontinued operations. This is a calculation of the profit its continuing operations generated during the period.

Dilution
The reduction of earnings, or the value of a stock, as the result of new shares of stock being issued by a company, sometimes through a merger, thereby diminishing the percent ownership represented by previously existing shares.

Discontinuing Operations
The profit made during the period from the businesses that will not be a part of the company in the future. These items are reported separately on the income statement.

Divestiture
A reduction of an asset. A sale, for cash or for securities, of a segment or business unit of a company to a third party which is an outsider.

Due Diligence
An investigation, usually voluntary, of a business or a business' practice, financials and operations. This process is frequently used to evaluate a target company for acquisition.

Earnout
A provision in a sales contract granting the seller future compensation based on the business meeting specific future financial targets.

Fair Market Value
An estimated price of what a buyer would pay a seller for a property. This value is only valid if a sale commenses.

Joint Venture
This is an agreement between two or more companies to undertake an economic activity where there will be an agreed contribution and participation of the respective companies.

Liquidating Value
The cash value of sold business assets.

Recast
To adjust or remodel the financials of a business to reflect the favorable aspects or opportunities.

Transaction Costs
All costs associated with a business purchase transaction.

Valuation Multiple
A method for determining the current value of a company by examining and comparing the financial ratios of relevant peer groups. The most widely used multiple is the price earnings ratio (P/E ratio) of stocks in a similar industry. (source: wikipedia)

This glossary was researched and compiled by the Acquisition Platform legal team.
Definitions were sourced from legal libraries and standard accounting dictionaries unless otherwise noted.
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