M&A Vocabulary

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In this ongoing series, a number of different M&A experts from the global offices of Rödl & Partner each present an important term from the English specialist language of the mergers and acquisitions world, combined with some comments on how it is used. We are not attempting to provide expert legal precision, review linguistic nuances or present an exhaustive definition, but rather to give a basic understanding or refresher of a term and some useful tips from our consultancy practice. 

Experts explain:

• Arbitration clauses in M&A transactions
• Auction Sale
• Audit vs. review vs. agreed-upon procedure vs. compilation
• Bank Guarantee
  
• Break-up Fee
  
• Bring Down Certificate
  
• Carve-out
  
• Cash Conversion Cycle
• Cash Free & Debt Free
  
• Cash Pooling
  
• CFC rules​
  
• Change of Control
• Choice of law clauses
  
• Closing Accounts, Locked Box Mechanism and Leakage
  
• Closing Conditions
• Conditions Precedent
• Country risk based on the example of Brazil
• Covenants
  
• Deadlock
• Debt Pushdown
• Deed under Common Law
• Disclosures
  
• Discount for lack of control, control premium
  
• Due Diligence
• Earn-Out
• Escrow Agreements
• Fair Disclosure
  
• Financial Factbooks vs. Vendor Due Diligence​
  
• GAAP​
  
• Goodwill
• HOHW clause
  
• Hold Harmless Clause
  
• Holder Control
  
• Indemnity vs. Warranty under Common Law
• Information Memorandum
  
• Information Request List
  
• Legal Opinion
  
• Letter of Intent (LOI)
  
• Liability for pre-contractual statements​
  
• Limitation of Liability (de minimis, basket, cap)
• Long Stop Date
• MAC Clause
  
• MBO, MBI, LBO
  
• Memorandum of Understanding
  
• Non-Binding Offer​​
  
• Non-Compete and Non-Solicitation clauses in M&A Transactions
  
• Non-Disclosure Agreement
  
• Normalized Earnings​
  
• Permitted leakage​
  
• Phantom Shares
  
• Post-Merger Integration​
  
• Pro forma financial information
  
• Profit and Loss Agreement
  
• Purchase Price Allocation
  
• Quality of Numbers and Quality of Earnings
• Reps & Warranties
  
• Retention Amount
  
• Sensitivity analysis​
  
• Signing and Closing
• Seller's Knowledge
• Thin Capitalization
  
• Third Party Claims
  
• Transition Service Agreement​​​
  
• Treaty-Shopping
• Virtual Data Room
  
• Working Capital Adjustment