Glossary

An A-to-Z of the deal vocabulary an owner runs into when selling a business.

These are the recurring terms across the four books behind this wiki. Where a term has its own page, follow the link for the full treatment. Definitions here are deliberately short.

A

Accretive acquisition: A deal that adds more value to the buyer than it cost, because acquired earnings are revalued at the buyer's higher multiple. See Accretive Acquisition.
Acquihire: Buying a company primarily for its staff's skills rather than its products or services.
Add-backs: Owner-specific or one-time expenses added back to profit because a new owner would not incur them, raising EBITDA or SDE. See Add-Backs and Normalization.
Adjusted EBITDA: EBITDA after removing one-time costs and replacing owner pay with a market-rate manager salary.
Advanced Value Acceleration (AVA): Snider's name for the grow path taken after de-risking, where bigger, longer-term, higher-risk strategic actions (key hires, new markets, acquisitions) are pursued for exponential value. See Value Acceleration Methodology.
Asset sale: A deal structure where the buyer purchases the company's assets; simpler for small deals but often higher tax for the seller. See Asset Sale vs Stock Sale.
Attractiveness (Business Attractiveness): In Snider's framing, how a business looks from the outside in to a buyer, scored as an index distinct from readiness. See The Triggering Event.

B

Basket: A loss threshold in a purchase agreement; a true deductible pays only the excess, a tipping basket pays the whole loss once crossed. See Baskets and Indemnification.
BATNA: Best Alternative To a Negotiated Agreement; your plan B and source of leverage. See BATNA in a Sale.
Bolt-on: A smaller company bought to add to an existing platform company.
Breakup fee: Amount paid to the seller if a signed binding deal collapses.

C

CEPA (Certified Exit Planning Advisor): The Exit Planning Institute credential Snider's method is built around; in his framing the credentialed Value Advisor who quarterbacks the owner's advisor team. See Value Acceleration Methodology.
CIM (Confidential Information Memorandum): A detailed package describing the business, given to a buyer after an NDA. See The Confidential Information Memorandum.
Closing: Finalization where documents are signed, funds transfer, and ownership passes.
COGS: Cost of goods sold.
Comparables: Valuation by reference to recent sales of similar companies.
Consideration: The price a buyer pays, most commonly cash and/or stock.
Contingent liability: A future obligation, such as an ESOP's duty to cash out departing members, that can drain cash flow.
Covenant: A promise to do or not do something, such as a non-compete or non-solicitation.
Customer concentration: Reliance on a few customers; buyers discount price when one exceeds roughly 15% of sales. See Customer Concentration.

D

Data room: Organized folder of business records shared with vetted buyers after an NDA. See Data Room.
DCF (Discounted Cash Flow): Valuation of future cash flows at present value using a discount rate. See Discounted Cash Flow.
Deal fatigue: When both sides tire of a transaction and start questioning the deal. See Deal Fatigue.
Deal momentum: The forward tempo of a transaction. See Deal Momentum.
Definitive purchase agreement: The final binding agreement between buyer and seller.
Downstroke: The guaranteed up-front cash portion of an offer, excluding any earnout.
Dry powder: Capital a private equity group has raised but not yet invested.
Due diligence: The buyer's in-depth investigation before signing the definitive agreement. See Due Diligence.

E

Earnest money / deposit: The buyer's good-faith cash held in escrow, often non-refundable if the buyer walks. See Earnest Money and Deposits.
Earnout: Future payments tied to the company's post-sale performance. See Earnouts.
EBITDA: Earnings before interest, taxes, depreciation, and amortization; a rough proxy for free cash flow. See EBITDA Multiples.
Escrow: Funds held by a neutral party until conditions are met or disputes resolved. See Escrow and Holdbacks.
ESOP: Employee Stock Ownership Plan; a vehicle for employee ownership requiring annual valuation.
Exclusivity / no-shop clause: A buyer's requirement that the seller stop talking to other buyers during diligence. See Leverage Collapses at the LOI.

F

Financial buyer: An acquirer, usually private equity, aiming to grow a business and resell it in 3 to 7 years. See Strategic vs Financial Buyers.
Five D's: Snider's involuntary triggering events, Death, Disability, Divorce, Distress, and Disagreement, with roughly a 50% chance of striking an owner. See The Five D's.
Forced sale: Selling under duress with little control over timing, buyer, or price. See The Forced Sale.
Four C's (Four Capitals): Snider's four categories of intangible capital, Human, Customer, Structural, and Social, that drive the multiple. See The Four C's of Intangible Capital.
Free cash flow: Cash a company generates after operating costs but before interest, taxes, depreciation, and amortization.
Fundless sponsor: Individuals who line up financing only after agreeing to buy a business.

G

Gates (Discover, Prepare, Decide): The three stages of Snider's Value Acceleration Methodology, run continuously on 90-day cycles. See Value Acceleration Methodology.
Goodwill: Intangible value a buyer pays above the fair value of hard assets. See Goodwill.
Green Zone: In Snider's exit-readiness scoring, the 67%-or-better target band, above average but not yet best-in-class. See The Triggering Event.

H

Highly leveraged transaction (HLT): A regulated loan with strict covenants that funds a typical private equity deal.

I

Indemnification: A purchase-agreement provision allocating post-sale liability and backing the seller's promises. See Reps and Warranties.
IOI (Indication of Interest): An early, less formal expression of interest giving a value range.
Investment thesis: The strategic reason a buyer would benefit from owning a business.

K

Key man life insurance: A policy premium that can be a typical add-back when recasting the P&L.

L

Letter of Intent (LOI): Usually non-binding document outlining proposed price and terms before due diligence. See The Letter of Intent.
Liquidity event: A sale, IPO, or other transaction that converts illiquid ownership into cash.
Liquidation preference: A preferred investor's right to a set payout ahead of common shareholders.

M

M&A: Mergers and acquisitions; the field of buying, selling, and merging businesses.
Master Plan / Master Planning: Christman's concept, central to Snider's method, of aligning business, personal, and financial goals into one plan with the owner and family at the center. See The Three Legs of the Stool.
Multiple: The factor applied to earnings or revenue to set sale price. See EBITDA Multiples.

N

NDA / confidentiality agreement: Agreement signed before a buyer receives confidential information.
Net proceeds: In Snider's framing, what an owner actually keeps after taxes, fees, and sale expenses, the number that really matters versus the headline price.
Net Promoter Score (NPS): Customer-loyalty metric used to demonstrate predictable satisfaction.
Non-compete: A seller's promise not to operate a competing business for a set time.
Normalizing / recasting: Restating the P&L to reflect likely profitability in a buyer's hands. See Add-Backs and Normalization.

O

Open-book management: Sharing financials company-wide and teaching employees to use them.
Owner-operated: The owner works in the business, so those duties must be replaced at sale. See Owner Dependence.

P

P&L (profit and loss statement): Statement of income and expenses over a period.
PEG (Private Equity Group): A financial buyer that acquires, improves, and resells companies, often using leverage.
Phantom stock: Synthetic equity letting employees share in value gains without owning real shares.
Pre-diligence: Assembling the buyer's diligence package before going to market. See The Pre-Diligence Package.
PREScore: Warrillow's questionnaire measuring an owner's psychological readiness to exit.
Profit Gap: Snider's term for the extra annual EBITDA a below-best business leaves on the table versus average and best-in-class peers. See The Value Gap.
Proprietary deal (prop deal): An exclusive negotiation with a single buyer and no competition.
Pull factors / push factors: What you are excited to go toward vs what is driving you out.
Put (option): The right to sell stock back at an agreed price.

Q

Quality of earnings (Q of E): An outside CPA analysis reconciling reported earnings with the CIM. See Quality of Earnings.

R

Range of value: Snider's idea that every business trades in an industry band of multiples; you cannot control the range, only your placement within it. See How Businesses Are Valued.
Recapitalization: Restructuring debt and equity; for sellers, selling part of equity and keeping a stake. See Recapitalization and the Second Bite.
Recasted EBITDA: Snider's "real number," EBITDA adjusted to show the true transferable cash benefit a new owner would see. See Add-Backs and Normalization.
Recurring revenue: Predictable repeat income that lifts the multiple. See Recurring Revenue.
Representations and warranties: The seller's contractual promises about the business. See Reps and Warranties.
Retrading: Renegotiating a term, often price, after an agreement in principle. See Retrading.
ROBS (Rollover for Business Startups): Using 401(k) funds penalty-free to acquire or grow a business.
Roll-up: Buying and consolidating multiple smaller companies into one larger entity.

S

SBA loan: A US government-guaranteed loan that can help an individual finance an acquisition.
SDE (Seller's Discretionary Earnings): Total owner benefit, profit plus pay and perks, used to value small businesses. See Seller's Discretionary Earnings.
Second bite of the apple: Selling remaining equity in a recapitalization later at a higher multiple. See Recapitalization and the Second Bite.
Secondary offering: New investors buy stock from founders or early investors, giving partial liquidity.
Seller carry / seller's note / VTB: Seller financing, taking payments over time, usually behind the buyer's bank loan. See Seller Financing.
Small company discount: A risk-based valuation reduction applied simply because a company is small.
SOPs (standard operating procedures): Documented processes that let a business run without the owner. See SOPs as a Sellable Asset.
Stay / success bonus: A cash retention incentive for key managers through a sale.
Stock sale: A deal structure where the buyer purchases the company's shares; often capital-gains treatment for the seller. See Asset Sale vs Stock Sale.
Strategic buyer: An acquirer whose own assets become more valuable by owning yours; pays for synergies. See Strategic vs Financial Buyers.
Strategic premium: Extra value a strategic buyer pays above financial worth for synergies. See The Strategic Premium.
Strategic value: In Snider's framing, the gross third-party-sale value used to baseline the range of value, distinct from estate, tax, or family-transfer value.

T

Teaser: A one-page anonymous summary used to entice a buyer into signing an NDA. See The Teaser.
Three legs of the stool: Snider's (via Christman) three co-equal components of a good exit: business, personal financial, and personal readiness. See The Three Legs of the Stool.
Trailing 12 / TTM / LTM: A P&L covering the last twelve months up to the most recent closed month.
Transferability: In Snider's framing, the precondition for harvesting value; intellectual capital must run the business without the owner before a buyer will pay a premium. See Owner Dependence.
Triggering Event: Snider's first deliverable, a baseline that correlates business valuation to the owner's personal, financial, and business readiness; also his term for the involuntary Five D's. See The Triggering Event.
Turn: An additional multiple of earnings, as in moving an offer from 4x to 5x.
Turnkey: A business whose team and systems run it without hands-on owner operation.

U

Ugly Baby Syndrome: Snider's name for an owner's tendency to overstate the worth of their business; attractiveness and readiness are "a state of fact, not a state of mind." See The Triggering Event.

V

Value Acceleration Methodology: Snider's continuous three-gate system (Discover, Prepare, Decide) for growing transferable value so the timing of an exit becomes irrelevant. See Value Acceleration Methodology.
Value Advisor: In Snider's method, the single credentialed advisor who quarterbacks the owner's whole team toward growing and unlocking value.
Value Builder Score: Warrillow's assessment of a business against the eight factors acquirers value. See The Eight Drivers of Value.
Value Gap: Snider's term for the difference between the maximum value in your range and where your business actually places, the dollar measure of what value acceleration is worth. See The Value Gap.
Value Maturity (Five Stages of): Snider's progression of Identify, Protect, Build, Harvest, and Manage that grows transferable value. See Five Stages of Value Maturity.

W

Wet signature: A physically signed document, sometimes required by banks or the SBA.
Working capital: Cash left in the business at sale so operations continue. See Working Capital Peg.

Z

Zeroing out the balance sheet: Closing company accounts and clearing debts at sale.

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Further Reading