A Plain-English Guide to Common M&A Deal Terms
- Mark Hartmann, MBA
- 2 hours ago
- 4 min read
When it’s time to sell your business, you’ll encounter a flood of acronyms, legal terms, and jargon that can make an already challenging process feel even more intimidating. Some terms define deal structure, while others affect leverage, timing, risk, and what happens after closing. This guide explains common M&A deal terms in plain English so you can better understand the sale process, evaluate what’s being proposed, and make more informed decisions.
Asset Purchase Agreement (APA) — An agreement in which the buyer purchases selected assets of the business, and may assume certain liabilities, without buying the company’s stock or membership interests.
Assignability (contract assignability) — Contract language that allows certain customer, vendor, or employment agreements to be transferred to the buyer at closing.
Change-of-control provisions — Contract terms that trigger rights, approvals, consents, or other actions when ownership of the company changes.
Data room — An organized online folder or portal containing the documents a buyer reviews during due diligence.
Death by a thousand cuts — A buyer tactic in which many small requests or issues are raised over time, gradually reducing value or making the deal less favorable to the seller.
Due diligence — The buyer’s detailed review of the business, including financial, legal, operational, tax, HR, and other areas, depending on the industry and transaction.
Earn-out — A portion of the purchase price that is paid later if the business meets certain agreed performance targets after closing.
EBITDA — Short for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a common measure of operating performance and a core metric used in business valuation.
Financial buyer — A buyer focused primarily on return on investment, cash flow, and eventual resale or exit, rather than operational synergies.
Last-minute discovery — A supposed new issue raised shortly before closing that is used to pressure the seller into making concessions.
Letter of Intent (LOI) — A mostly binding agreement that outlines the basic terms of a proposed deal, including price, structure, timeline, and exclusivity.
No-shop (exclusivity) — An LOI provision that prevents the seller from soliciting or negotiating with other buyers for a set period of time.
Pitch book (Confidential Information Memorandum, CIM) — The marketing document prepared by the M&A advisor or business broker that presents the company’s story, highlights its strengths, and discloses known issues to reduce surprises later in the process.
Post-LOI nibbles — A series of smaller asks or concessions made by the buyer after the LOI is signed that, taken together, can reduce the seller’s outcome.
Private equity (PE) — Institutional capital that acquires companies with the goal of growing them and exiting later, often through a future sale. Private equity firms frequently target businesses with more than $1 million in EBITDA.
Representations and warranties — Statements and assurances made by the parties in the purchase agreement about the condition of the business and the facts underlying the transaction. If they prove untrue, they may create liability after closing.
Retrade — An attempt to lower the purchase price or change deal terms after the LOI has been signed, often during due diligence. Sometimes there is a legitimate reason. Other times it is a negotiating tactic.
Roll-up — A strategy in which a buyer acquires and combines multiple companies in the same industry to create scale and increase value.
Seller note — A portion of the purchase price that the seller agrees to finance and receive over time based on negotiated repayment terms.
Seller’s Discretionary Earnings (SDE) — A cash flow metric used mainly in smaller, owner-operated business transactions. It is generally EBITDA plus the owner’s compensation and certain add-backs.
Stock Purchase Agreement (SPA) — An agreement in which the buyer purchases the seller’s stock or ownership interests and takes over the company itself, including its assets and liabilities.
Strategic buyer — A buyer already operating in the industry who is acquiring the company for strategic reasons such as growth, market share, geographic expansion, customer access, or cost synergies.
Transition agreement/transition plan — A written plan describing the seller’s post-closing involvement, which may include training, introductions, time on site, and handoff responsibilities.
Valuation multiple — The number applied to EBITDA or SDE to estimate value. The multiple varies based on business size, industry, growth, risk, and other market factors.
Walk-away point — The point at which the seller decides the deal is no longer acceptable and will not make further concessions.
Working capital adjustment — A closing mechanism that compares the actual working capital delivered at closing to the agreed target and adjusts the purchase price up or down accordingly.
Working capital peg — The agreed target amount of net working capital the seller is expected to deliver at closing. It serves as the benchmark for any working capital adjustment.
No guide can replace legal, tax, or transaction advice specific to your deal, but understanding the language is a good starting point. The more familiar you are with these terms, the better prepared you’ll be to evaluate offers, identify issues early, and move through the process with more confidence. Mark Hartmann’s book, Sweat Equity Payday, offers broader insight into the decisions, dynamics, and preparation that shape a successful exit.
If you're considering selling your business and seek experienced guidance before going to market, contact HartmannRhodes for a confidential conversation.
Mark Hartmann is a former business owner turned M&A advisor—and the author of Sweat Equity Payday—who knows firsthand what it takes to build, grow, and sell a successful company. A three-time Inc. 5000 CEO honoree, he led his own eight-figure sale and now helps business owners sell companies worth $1M to $25M. Mark understands that selling a business is personal, not just financial. That’s why he works closely with owners to maximize value, protect their legacy, and transition on their terms.
He holds an MBA from Eastern University and a master's degree in organizational change management from St. Elizabeth University, as well as Certified M&A Professional (CM&AP), Certified Business Intermediary (CBI), Certified Exit Planning Advisor (CEPA), and Certified Value Builder (CVB) credentials.
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HartmannRhodes advises owners of companies typically valued between $1–$25 million. If you’d like a structured pre-sale valuation review and a readiness roadmap, we can walk you through the process and tailor it to your timeline and goals. Contact us today!
Blog: A Plain-English Guide to Common M&A Deal Terms
