Glossary

Confidentiality agreement
Secrecy guarantee signed by the potential buyer to protect the information provided during the study of the file.

WCR (working capital requirement)
(Trade receivables + inventories + other current assets) – (Trade payables + other current liabilities)

Book Value
Value of a company calculated from its equity

Bottom line
Net income (last line of the income statement)

Business angels
Individuals who invest their wealth in start-up or developing companies, often giving them the benefit of their personal experience.

Business plan
Development plan of the company over 3 to 5 years with detailed comments in the commercial, competition, products, techniques, means of production, investments, men, data processing, financial fields…

Capital
Amount of equity capital brought to a company.

Seed capital
Phase prior to venture capital, capital contribution for start-up companies, often made by individuals (business angels). In English: seed capital

Market capitalization
The value of a company obtained by multiplying the price of a share (listed on the stock exchange) by the number of shares.

Venture capital
Investment in equity or quasi-equity in an unlisted company and intervening downstream of the seed capital.

Closing
Final stage of a sale operation, with the signature by all participants (sellers and buyers) of the sales contract.

Corporate governance
Corporate governance, responsibility and obligations of the board of directors.

Data Room
All the information documents on a company to be sold are placed in a room (at a lawyer’s office) and potential buyers can consult them under certain conditions (with or without photocopying rights). This is the case when the buyer knows the company (competitor for example), and it is not possible to make him visit.

Due-diligence
All the measures of research and control of information allowing the buyer to base his judgment on the assets, the activity, the financial situation, the results, the prospects of the company.

EASDAQ
European market specialized in growth stocks, created in 1996.

EBIT
Earning before interest and taxes. Operating profit before financial expenses and corporate tax.

EBITDA
Earning before interest, taxes, amortization and depreciation. Operating profit before financial expenses and corporate tax, depreciation and amortization.

Leverage
Multiplier effect of the return on equity resulting from the use of external financing.

Earn out
Earn-out clause paid by the buyer based on future results (after the sale)

EVA (economic value added)
A method of measuring value creation by the difference between the operating result and the weighted average cost of capital.

Liability guarantee
Guarantee given by the seller to the buyer on the level of equity.

Holding company
A company whose main purpose is to hold equity interests in companies.

True and fair view
This concept concerns the company’s accounts. They must represent the situation of the company in a faithful, sincere and fair manner.

Initial Public Offering (IPO)
Initial public offering.

Intermediary
An independent third party (legal or natural person) acting as a mediator or advisor in negotiations (e.g. during a sale, an IPO).

Institutional investor
Pension fund, insurance company or asset management company, as opposed to private investors, individuals.

Letter of intent, or Term sheet
This letter is sent by the potential buyer to the company’s shareholders, or their representative, at the end of the due diligence. It stipulates the price and the conditions of purchase.

Liquidity
Fluidity of the market with significant supply and demand.

Memorandum
A document similar to a prospectus, which presents the proposed transaction.

NASDAQ
American market for growth stocks, which inspired the Nouveau Marché in France and the European Easdaq.

Net Income
Net income

Net equity (book value)
Net equity (book value)

NIAT
Net income after tax. Net income after corporate taxes.

New Market
Newly created stock markets in Europe to allow the listing of young technology or growth companies.

NYSE
New York Stock Exchange.

Shareholder agreement
Contractual document that details the relationships between the various shareholders or groups of shareholders in a company.

PER Price earning ratio
Multiplier of net income to determine the value of the company.

Pre-closing
Exchange between the future shareholders, the sellers and their advisors of all the legal documentation that will be signed at the closing. This period allows the documents to be adapted to the requirements of each party.

Accounting principles
Rules and principles guiding accounting practice: – True and fair view, – Valuation of real estate, – Inventory valuation principles, – Non-compensation, – Principle of prudence, – Consistency of methods, – Historical cost, – Going concern, – Separation of fiscal years, – Materiality…

RCU (return on capital employed)
Rate of return on capital employed: EBIT/ Capital employed (Net fixed assets + WCR)

Road show
Visit of investors during a trip of several stages.

ROI (return on investment)
Rate of return on equity. Net income/equity.

Slide show
Summary of the business plan, corresponding to the main points of the project in 10/12 documents (Powerpoint type), allowing for an oral presentation of 15 minutes.

Start-up
Young company in strong growth.

Goodwill
Additional price paid at the time of the acquisition compared to the book value.

Term sheet
Letter of intent or memorandum of understanding

Round table
Capital distribution including the arrival of new investors.

US GAAP
US accounting principles

Venture capital
Venture capital, and by extension private equity.