What are Fixed Charges? Fixed charges, sometimes known as fixed costs or fixed expenses, are business expenses that occur periodically and are independent of the operational tempo of the business. It is in contrast to variable costs, which vary with business volume. Some examples of fixed charges include principal and interest payments on debt, insurance,…
What is Staple Financing? Staple financing is a financing package arranged by a seller for potential purchasers as part of an auction process. It is organized by the seller and their financial advisors, and it comprises the principal, fees, and the loan covenants. The term “staple” is derived from the fact that the commitment letter…
What is a Pitchbook? A pitchbook is a sales book used by investment banks to sell products and services, as well as to pitch potential clients. The purpose of a pitchbook is to secure a deal with the potential clients. It provides an overview of the firm, including historical information, financial strength, and services available…
What is a Negative Covenant? A negative covenant, also known as a restrictive covenant, is a covenant that restricts one party from carrying out certain actions. Sometimes the agreement involves some form of compensation to the party that consents to the restriction. Negative covenants are considered legal, but some of their provisions have been found…
What is Deal Origination? Deal origination, also referred to as deal sourcing, is a process used by finance professionals such as investment bankers, venture capitalists, and corporate development professionals to identify investment opportunities in the market. The goal of deal origination is to ensure a large volume of deals is obtained in a given period to maintain…
What is a Platform Company? A platform company refers to the initial acquisition made by a Private Equity Group in a specific industry or marketplace. The acquisition acts as the starting point for other acquisitions in the same industry. Platform companies create value by facilitating exchanges between consumers and producers of goods or services. For…
What is a Voting Trust? A voting trust is an arrangement where the voting rights of shareholders are transferred to a trustee for a specified period. The shareholders are then awarded trust certificates that provide evidence that they are beneficiaries of the trust. They also retain a beneficial interest in the company’s stock and receive…
What is Financial Synergy? Financial Synergy occurs when the joining of two companies improves financial activities to a level greater than when the companies were operating as separate entities. Usually, M&A transactions result in a larger company, which has a higher bargaining power to get a lower cost of capital. Achieving a lower cost of capital as…
