Accredited Investor: An investor or institution that the SEC permits to invest in certain unregistered securities. There are eight different categories. To learn about the types, please refer to our Terms of Service. All Axial Members are accredited investors.
Acquisition: The act of one company buying another. The acquisition is complete when the buying company obtains majority ownership of the target company.
Amortize: To gradually and systematically write off an expense over a given amount of time. For example, if a $10M purchase has a 5-year life, it can be amortized at the rate of $2M/year.
Arbitrage: The act of exploiting variations in market price by simultaneously purchasing and selling nearly identical assets in different markets.
Buyout: Like an acquisition: the buyer acquires the target company by purchasing the majority of the company’s shares of stock or the majority of the assets.
Capital Call: A fund manager’s (GP) request for capital already promised by an investor (LP)
Capital Structure: The combination of a company’s equity and debt capital instruments.
Distribution: A fund manager’s (GP) return of profits back to investors (LP) after the sale of an asset. Pay day.
Divestiture: Getting rid of an asset, subsidiary or division by means of sale, exchange, closure or bankruptcy. Almost always non-core divisions.
Due Diligence: The thorough investigation of a target company just prior to purchase. A buyer performs due diligence (DD) to confirm the accuracy of the company’s accounts and financial data.
Earnings Before Income and Tax (EBIT): A measure of cash for potential investors (as you can’t put depreciation or amortization in your bank account).
Earnings Before Income, Tax, Depreciation and Amortization (EBITDA): An earnings measure independent of accounting and financial adjustments used to measure a company’s underlying performance.
Financial Buyer: A type of buyer interested in making a high return on investment. Typically, these buyers are focused on purchasing the future cash flow of a company at set multiples and use cash flow growth as buying criteria. Financial buyers often include private equity firms, venture capital firms, hedge funds, family offices and high net worth individuals. (Compare with: Strategic Buyers)
General Partner (GP): A partner and investor in a fund responsible for actually doing the deals.
Growth Capital: A later-stage round of funding meant to encourage further development and growth of a business.
Indication of Interest (IOI): A buyer’s non-binding expression of interest in purchasing a company or asset. Usually precedes management meetings and includes a rough offer price based on current interest and information.
Initial Public Offering (IPO): A private company’s first sale of stock to the public. A company traditionally ‘goes public’ in an effort to raise more capital for accelerated growth.
Internal Rate of Return (IRR):
The discount rate at which the Net Present Value of all cash flows from a particular project equal zero. Generally, the higher the IRR, the more desirable the investment.
A high-level summary of a business to be shared with potential investors or acquirers. See Opportunity
for more detail.
Letter of Intent (LOI): A legal document outlining a company’s intention to buy a business. A seller can legally accept only one LOI and then enters due diligence with the buying party. The LOI is the next level of commitment after an Indication of Interest (IOI).
Leveraged Buyout (LBO): The acquisition of another company through the use of a large amount of debt. Often, the target company’s assets are used as collateral against the debt.
Limited Partner (LP): A partner and investor in a fund who provides some of the capital for an investment. The capital is then invested by the GPs. LPs typically includes HNW individuals, endowments, or pension funds.
London Interbank Offered Rate (LIBOR): The interest rate at which banks lend money to one another. The rate changes daily and is determined by averaging the inter-bank interest rates being offered by the members of the British Bankers Association. The rate is used as a reference to price commercial loans. It is currently the benchmark for an estimated $800 trillion debt instruments. Confidence in the number was shaken due to scandal in mid-2012 in which banks were found to have manipulated the number.
Market Capitalization: The total dollar value of a firm’s outstanding shares. Market cap can be calculated by multiplying the number of common shares outstanding by the share price.
Merger: When two companies combine (or merge) into one rather than remain separately owned and operated. Often referred to as a “merger of equals.”
An online network built for mergers and acquisitions. See Private Market Network
or our article discussing merger networks.
Mezzanine Financing: A form of financing that blends debt and equity. Unlike traditional debt lenders, mezzanine firms tend to lend at higher rates and reserve the right to trade some of the debt for equity/ownership. Mezz financing is usually a series of subordinated debt, receiving liquidation after senior debt. Typically used when traditional funding is insufficient or unavailable.
Non-Disclosure Agreement (NDA) / Confidentiality Agreement (CA): A legal contract between two parties ensuring the confidentiality of exchanged company details and information. Usually disregarded on golf courses and when sharing cocktails.
♦ Opportunity: A high-level summary of a particular deal. An Opportunity is shared with other relevant Axial Members on a confidential one-to-one basis.
Private Market Network (PMN): Online platforms that connect investors, advisors, and companies (both public and private) around private financial transactions. The networks support a variety of transaction types, including private M&A, private debt/equity capital raises, and even the trading of shares of private companies.
♦ Pursuit: An expression of interest to engage with another Member to discuss a particular Opportunity.
Recapitalization: The reorganization of a company’s capital structure to build a more sustainable business model or to cash out a single shareholder.
♦ Relationship Gap: The gap between static data in a standard CRM and the potential relationships available in a constantly updating network. The distance between personal business relationships and the most valuable potential relationships in a networked world.
Search Fund: A type of investment fund managed by one or two individuals. These managers will raise capital to cover one to two years of operating costs as they ‘search’ for a target company to acquire. Once a target is identified, the managers will seek a second round of funding to purchase the target.
Senior Debt: A class of debt with priority in the repayment schedule if a company goes bankrupt. Given the lower risk, senior debt lenders tend to loan money at lower rates. Still, ‘lower’ is a relative term.
Strategic Buyer: A type of buyer interested in expanding an existing company by eliminating competitors, buying into new markets, or adding to an existing division or holding. Their focus assets can easily be merged with their current products or services, or that are strategically important for the company. These buyers typically include operating businesses that provide products and services. (Compare with: Financial Buyers).
Supply Chain Finance:
A set of tools, techniques and products for financing different parts of a supply chain. Often used when describing a manufacturer offering financing to suppliers or requesting payment terms in order to better manage working capital. For more, see 6 types of supply chain finance
Trading Comparable: A valuation technique in which a company’s value is estimated by applying the multiples of related, comparable businesses to a company’s own revenue or EBITDA. Traditionally, the more similar the compared businesses are, the more relevant the valuation. Trading comps are usually considered along with a DCF or other strategies.
Transaction Comparable: Similar to trading comparables, transaction comparables are one of the most widely used valuation techniques. Transaction comparables estimate a company’s value by utilizing multiples paid in prior, similar transactions. While the strategy can be indicative of worth, it is often difficult to find truly comparable transactions.
♦ Transaction Profile: Forward-looking investment criteria defined and updated by Members. These Transaction Profiles are matched and presented to Members with live Opportunities.
Turnaround: The return to profitability for a previous unprofitable company. Used to describe a company for sale that is currently unprofitable – a ‘turnaround candidate’ – especially if the company is unprofitable due to debt repayment terms.