Glossary of Terms


Definitions are provided for the following glossary terms in both The Practitioner’s Guide to Investment Banking and The Recruiting Guide to Investment Banking.

A

ability to pay analysis
accelerated depreciation
accelerated marketing transaction
acceleration clause
accretion dilution analysis
acquisition
acquisition currency
additional consideration
advance notice provision
affirmative covenant
aftermarket
agreement and plan of reorganization
American depositary receipt (ADR)
amortization
amortizing debt
analysis at various prices (AVP)
annuity
anti-dilutive
anti-greenmail provision
arbitrageur
asset-based lending
asset purchase agreement
asset swap
asset write-down
asset write-up
available-for-sale method

B

balance sheet
bank debt
basic shares outstanding
basis points
basis step-down
basis step-up
benchmark rate
best efforts deals
bid/offer spread
blank check preferred stock
block trade
bond
bond indenture
bookrunner
book value
book value of equity
boot
borrower
breakeven to EPS
breakup analysis
breakup fee
bridge financing
bullet payment
business judgement rule
business purpose doctrine
buy-side process
bylaws

C

CAGR
calendar year
call option
cap
capital asset
capital expenditures (capex)
capital gain/loss
capital gains tax
capital loss carryback
capital loss carryforward
capital structure
capitalized
carryover tax basis
cash flow
cash flow accretion/dilution analysis
cash flow from financing
cash flow from investing
cash flow from operations
cash flow statement
cash taxes
change-of-control provision
change of control transaction
Chinese wall
classified board
closing balance sheet
closing conditions
collar
collateral
commercial paper (CP)
common equity
comparable companies
comparable company analysis
comparable transaction analysis
compounding
compound annual growth rate (CAGR)
compound interest
confidentiality agreement (CA)
consideration
consolidated tax return
consolidation method
contingencies
continuity of business enterprise doctrine
continuity of shareholder interest doctrine
contractual subordination
contribution analysis
control premium
convertible securities
corporate defense
corporate development group
corporate income tax
corporate-level tax
corporate merger
cost method
cost of capital
cost synergies
counter-parties
coupon rate
coverage bankers
coverage ratio
credit analysis
credit default swap CDS
credit impact analysis
credit outlook
credit rating
credit ratios
credit risk
credit spread
credit watch
cross-acceleration rights
cross-default provisions
crossover issuers
crown jewel defense
cumulative dividend
cumulative voting
current assets
current liabilities

D

DD&A dead hand provision
deal protection
deal team
debt
debt capacity analysis
deferred taxes
deferred tax asset
deferred tax liability
depreciation
depletion
derivative
diluted shares
discounted cash flow analysis (DCF)
discounted equity value analysis (DEV)
discounting
discount rate
distribution
diversifieds
divestiture
dividend per share (DPS)
dividend accretion/dilution analysis
dividend yield
division
double taxation
DRD rules
dual path
due diligence
duration of an investment
Dutch auction

E

earnings before interest and taxes (EBIT)
earnings before interest, taxes and DD&A (EBITDA)
earnings before taxes (EBT)
earnings per share (EPS)
earnings to common
earnout agreement
engagement agreement
enhanced scrutiny
enterprise value
entry multiple
EPS accretion/dilution analysis
equity
equity method
equity value
ethical wall
evergreen facility
exchange offer
exchange offer prospectus
exchange ratio
execution risk
exercise price
exit multiple

F

face value fair market value (FMV)
fair price provision
fairness opinion
Financial Accounting Standards Board (FASB)
financial buyers
financial covenants
financial impact analyses
financial restructuring
financial sponsors
firm value
fiscal year
fixed exchange ratio
fixed price tender offer
flip-in exchange plan
flip-in rights plan
flip-over plan
floating exchange ratio
floor
flowback
flowback analysis
follow-on offering
football field
forward EPS
free cash flow
fully marketed transaction
future value

G

GAAP books
gain/(loss) on sale
Generally Accepted Accounting Principles (GAAP)
golden parachute
goodwill
greenfield
gross spread
growing perpetuity
growth rate accretion/dilution analysis
guarantor

H

Hart-Scott-Rodino Act (HSR Act)
hedging
hell-or-high-water clause
high grade debt
high yield debt
historical stock price analysis
hockey stick
hold level

I

if-converted method
impairment test (for goodwill)
in the money
income statement
indemnification
indexed stock price graph
initial public offering (IPO)
inside basis
intercompany transactions
interim operations
interloper
interloper analysis
internal rate of return (IRR)
intrinsic valuation
investment
investment grade debt
investment period
investment horizon
investment duration
IRS
irrevocable proxy
issuer

J

joint bookrunner
joint merger prospectus/proxy
joint venture
junk debt

L

lead arranger(s)
league tables
leverage ratio
leveraged buyout (LBO)
leveraged buyout analysis
leveraged loan market
liability
liability management
LIBOR (London Interbank Offer Rate)
liquidation preference
liquidation value
liquidity
liquidity ratio
loan agreement
long-form merger
long-term assets
long-term debt (LTD)
long-term liabilities
loss on sale
LTM
LTM EPS

M

management’s discussion and analysis (MD&A)
marked to market
market value
material adverse change (MAC)
maturity
medium-term notes (MTNs)
merger
merger agreement
merger of equals (MOE)
merger prospectus/proxy
mezzanine capital
midyear convention
minority interest
multiple compression
multiple expansion

N

NASD
NASDAQ
NRSRO
NYSE
natural historical exchange ratio analysis
negative covenant
net assets
net debt
net operating losses (NOLs)
net present value
no action by written consent provision
no-action letter
no hand (non-redemption) provision
no material adverse change condition
no shop / no talk restrictions
non-call period
non-compete provisions
non-disclosure agreement (NDA)
non-investment grade debt
non-recurring items
non-solicitation provision
notching

O

offer to purchase
one-line consolidation
on the block
opening balance sheet
operating ratio
opportunity cost
option
out of the money
outside basis
overnight transaction

P

perpetuity
perpetuity growth rate method
personal income tax
phantom amortization/depreciation
PIPE
poison pill
power to fill vacancies provision
PP&E
precedent transaction analysis
preferred equity
premium paid analysis
pretax earnings
pretax operating income
pretax profit
present value
price to book ratio
price to earnings (P/E)
primary offering
principal
priority of claim
private equity firm
private letter ruling
private placement
pro forma
product bankers
proxy contest
purchase and sale agreement
purchase price
purchase price adjustment
purchase accounting
pure play
put option

Q

quality of earnings

R

raider
recapitalization
refinancing
regulatory analysis
relationship bankers
relative stock price performance analysis
relative valuation
relative valuation analysis
removal of directors “for cause” provision
re-offer yield
reporting period
representations and warranties
restrictive covenant
restructuring
retained earnings
return on assets (ROA)
return on equity (ROE)
return on invested capital (ROIC)
revenue synergies
reverse split
Revlon duties
revolving line of credit (revolver)
risk arbitrage
risk vs. reward

S

Sarbanes-Oxley Act of 2002 (SOX)
schedule of assets and liabilities
secondary market
secondary offering
secured lending
Securities and Exchange Commission (SEC)
SEC Rule 13D
security
sell-side process
senior long-term debt
senior secured loan
senior unsecured loan
Series 7
shareholder-level tax
shareholder rights plan
shareholders’ equity
shares traded analysis
shelf registration
short-form merger
short-term debt (STD)
short-term liabilities
short-term loan
simple interest
sinking fund
source document
special dividend
special meeting
special meeting provision
speculative grade liquidity ratings (SGLs)
spin-off
split-off
staggered board
stalking horse
statutory merger
stock purchase agreement
stock split
stockholder lockup
straight-line
strategic buyers
strategic planning group
strategic transaction
strike price
structural subordination
subordinated debt
subsequent offer period
subsidiary
sum of the parts analysis
supermajority provision
swap
syndicate group
synergies
synergies analysis

T

tax basis
tax books
tax credits
tax-deductible expense
tax-free reorganizations
tax leakage
tax loss carryback
tax loss carryforward
tax return work papers
tax shield
taxable event
taxable gain/(loss)
taxable income
tender offer
term sheet
terminal multiple method
terminal value
termination provisions
time value of money
total debt
total return
total return accretion/dilution analysis
tracking stock
trailing EPS
tranches
treasury group
treasury shares
treasury stock method
trust preferred equity

U

underwrite
underwritten deals
unlevered free cash flow
unrealized gain/(loss)
unwinding

V

valuation allowance
value creation analysis
venture capital firms

W

warrants
weighted average cost of capital (WACC)
weighted average shares outstanding
white knight
working capital

Y

yield
yield curve
yield to call
yield to maturity (YTM)

Z

zero coupon bonds