PE Jargon

Question 1

Book, CIM, CIP

Answer 1

Confidential Information Memorandum (CIM), Confidential Information Presentation (CIP). Market the company during the deal process

Question 2

EBITDA

Answer 2

Earnings before interest, tax, depreciation, and amortization. An attempt to get net income closer to cash flow. Valuation number (matters more than net income). Deals are done cash free and debt free EBITDA is used

Question 3

Adjusted earnings

Answer 3

One-time items added to the earnings number. Define that item tho

Question 4

Add backs

Answer 4

The ‘one-time item’ used to get to adjusted earnings

Question 5

Accretive

Answer 5

Incremental growth of earnings. ADD to the earnings of the acquirer. What you want

Question 6

Platform

Answer 6

Underlying operations of a business. Company that can scale with minimal capital investment

Question 7

TTM, LTM

Answer 7

Trailing twelve months, last twelve months

Question 8

Exit multiple

Answer 8

Multiple the adjusted EBITDA the company is valued at

Question 9

Enterprise value, EV

Answer 9

Total value including cash reduced by existing debt

Question 10

MP

Answer 10

Management Presentation. Books > IOI > buyers list reduced to 15 to 3 > management presentation begin. Direct access to the management team

Question 11

ReCap

Answer 11

Recapitalization. Restructure equity and/or debt

Question 12

Retrade

Answer 12

Deal repriced with exclusivity. Happens during QofE

Question 13

Proforma

Answer 13

Forward looking financial models

Question 14

Quality of Earnings, QofE

Answer 14

Audit of financial statements going back e-5 years. To confirm EBITDA number is correct. Done by buyer. Seller might perform to increase value during marketing stage - more confidence in numbers

Question 15

De Novo

Answer 15

From the new. New location started, not acquired

Question 16

Tuckin

Answer 16

Small deal, absorbing a small company. In PE, you are either a platform and you acquire OR you are acquired by the platform and ‘tuckedin’

Question 17

Strategic buyer

Answer 17

Competitor buyer. Direct competitor or someone new to the space

Question 18

Center-level EBITDA

Answer 18

EBITDA generated under roof of location/division without corporate allocations

Question 19

Deal flow

Answer 19

Condition of current PE environment. High/low deal glow

Question 20

Regional Density

Answer 20

Region the company covers. If company provides service- want to see multi state operation. If have a couple companies spread through the states, the Reginal Density is not achieved

Question 21

CAGR

Answer 21

Compound annual growth rate. Rate of return needed to get brome beginning to end balance. Profits reinvested at the end of year

Question 22

Run rate

Answer 22

Revenue growth rate over a period of years/quarters. Used with expenses and earnings

Question 23

Scalable

Answer 23

Grow without disruption or great capital demands. Platform companies should should scale easily while increasing earnings

Question 24

ROI

Answer 24

Return on interest

Question 25

ROR

Answer 25

Rate of return, over time.net gain or net loss

Question 26

YOY

Answer 26

Year over year, percent change

Question 27

Cap Table

Answer 27

Shows Ownership of business and how much they own. Generally fully diluted

Question 28

Fully diluted

Answer 28

Shares after all possible shares are converted (bonds, options, eployyee stock)

Question 29

Contribution margin

Answer 29

Margin a product or location contributes to business

Question 30

Roll-over

Answer 30

Amount of equity existing for management team to roll into new deal

Question 31

GAAP

Answer 31

Generally accepted accounting principle

Question 32

Internal rate of return, IRR

Answer 32

Net return earned over years. Not a return of cash, just a calc value of how well the cash is being used to generate value

Question 33

Beauty pageant

Answer 33

IB compete to represent the business

Question 34

MOIC

Answer 34

Multiple of invested capital. Return multiple. If invest 5 and get 15 then MOIC is 3x