Inside M&A and Private Equity Deals for Privately Held Companies

Union League Business Leadership Forum

At the Cards by N.C. Wyeth

Important Jargon

1. Enterprise Value (total of debt + equity; seller keeps cash)

2. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization; plus legitimate addbacks; capex does matter)

3. Recapitalization and Equity Rollover (tax free by seller)

4. Multiple of Invested Capital (minimum return for PE firm)

5. Quality of Earnings analysis (third party; beyond/inside the audit)

6. Triggering events (minority investor protections)

Deal Price

1. Relative value (to revenue; to EBITDA; development stage)

2. Structure (asset v. equity interest deal differences; tax considerations)

3. Negotiation process (indication of interest; clarity on terms)

4. Form of payment (cash; stock; earnout)

5. Working capital adjustment (historical v. prospective; deferred  rev.)

6. Excluded assets and/or liabilities

Insights

1. Timing (deliberative v. reactionary)

2. Negotiation (public v. private deals)

3. Reps and warranties (caps; insurance and costs, carve-out items)

4. Virtual data rooms (responsibility of seller/issuer/borrower)

5. Advisors (team and coach)

6. Impact (interruption) from Coronavirus and oil price plunge