What is an Acquisition? An acquisition is defined as a corporate transaction where one company purchases a portion or all of another company’s shares or assets. Acquisitions are typically made in order to take control of, and build on, the target company’s strengths and capture synergies. There are several types of business combinations: acquisitions (both companies…
Overview of the M&A Process The mergers and acquisitions (M&A) process has many steps and can often take anywhere from 6 months to several years to complete. In this guide, we’ll outline the acquisition process from start to finish, describe the various types of acquisitions (strategic vs. financial buys), discuss the importance of synergies (hard…
What is a Success Fee? In finance, a success fee is a commission paid to an advisor (typically an investment bank) for successfully completing a transaction. The fee is contingent on successfully helping the client achieve their goal, and thus aligns the interests of the client and the advisor. In a merger and acquisition process, a success…
What is a Fairness Opinion? A fairness opinion is a report compiled by a qualified investment banker or advisor that evaluates the fairness of the price offered during an acquisition, takeover, or merger. The opinion relates to the price offered by the buyer and the fairness of the terms to the company’s shareholders. It is…
What is an Offering Memorandum? An Offering Memorandum is also known as a private placement memorandum. It is used as a tool to attract external investors, either specifically targeting a known group or just soliciting willing investors in general. The document enables the investor to understand in detail the investment, so as to help them…
What is Synergy? Synergy is the concept that the whole of an entity is worth more than the sum of the parts. This logic is typically a driving force behind mergers and acquisitions (M&A), where investment bankers and corporate executives often use synergy as a rationale for the deal. In other words, by combining two…
What is a Creeping Takeover? In mergers and acquisitions (M&A) a Creeping Takeover, also known as Creeping Tender Offer, is the gradual purchase of the target company’s shares. The strategy of a creeping takeover is to gradually acquire shares of the target through the open market, with the goal of gaining a controlling interest. Understanding…
What is a Financing Contingency? In a home sale and purchase agreement, a financing contingency refers to a clause that expresses that the offer is contingent on the buyer securing financing for the property. A financing contingency provides the buyer with protection from potential legal ramifications in case the deal fails to close. Financing Contingencies in…
What is a Key Man Clause? A key man clause is a contractual clause that prohibits an investment firm or fund manager from making new investments if one or more key persons are not available to devote the necessary time to the investment. A key man is an important employee or executive who is critical…
What is Quality of Earnings? A quality of earnings report is a routine step in the due diligence process for private acquisitions. The report assesses how a company accumulates its revenues – such as cash or non-cash, recurring or nonrecurring. Net income is not necessarily a 100% accurate indication of financial performance for a business….
