A Glossary of M&A Terms for Business Owners.

Adjustments made to a company's reported earnings to show what profit would look like under a new owner — typically owner salary above market rate, personal expenses run through the business, and genuine one-time costs.

The detailed presentation of your business — financials, operations, customers, growth story — shared with serious buyers only after they sign an NDA. Sometimes called the "book."

A secure online repository holding the documents buyers review during due diligence — financial statements, contracts, leases, employment agreements, corporate records.

A portion of the purchase price paid after closing, contingent on the business hitting agreed targets. Earnouts appear in roughly a quarter of private deals overall and about a third of smaller middle-market transactions (SRS Acquiom, 2026).

Earnings before interest, taxes, depreciation, and amortization — the standard measure of operating profit used to price private businesses. Most middle-market companies sell for a multiple of adjusted EBITDA.

A slice of the purchase price held back at closing — typically by a neutral third party — to cover breaches of the seller's representations and warranties discovered after the deal closes, usually released after 12–24 months.

The period after signing an LOI during which the seller agrees to stop talking to other buyers while the chosen buyer completes diligence and documentation.

The document in which a buyer sets out the proposed price and key terms of the deal. Mostly non-binding — except for provisions like exclusivity and confidentiality, which do bind.

The teaser is a one-to-two-page anonymous profile of your business — industry, size, financial highlights — circulated to prospective buyers without naming the company. The NDA (non-disclosure agreement) is what a buyer signs before receiving anything that identifies you.

An independent accounting analysis — narrower and more skeptical than an audit — that tests whether reported EBITDA is real, recurring, and correctly adjusted. Buyers almost always commission one during diligence; well-prepared sellers commission their own first.

The seller's formal statements of fact in the purchase agreement — that the financials are accurate, taxes are paid, litigation is disclosed, contracts are valid. If one proves untrue after closing, the buyer can claim against the escrow or the seller directly.

A portion of the seller's proceeds reinvested as ownership in the business under its new owner — common in private equity deals, where sellers often retain 10–30% and get "a second bite of the apple" when the buyer eventually resells.

The "normal" level of working capital — receivables, inventory, payables — the buyer expects delivered with the business at closing, typically set from a trailing-twelve-month average. Deliver less and the price drops dollar-for-dollar.