Money owed to your business who have been invoiced but have not yet paid. Buyers pay close attention to A/R aging schedules - overdue receivables can signal customer health issues or collection problems that affect working capital.

A buyer’s calculation of whether an acquisition will increase (accrete) or decrease (dilute) their earnings per share or overall value. If an acquisition is accretive, it means the deal adds value to the buyer which is why strategic buyers often pay more than financial buyers.

EBITDA that has been modified to remove non-recurring expenses, owner-specific compensation, and other items that would not exist under new ownership. This is the number most buyers use to calculate your purchase price. Getting your add-backs right is one of the most important things you can do before going to market.

An expense that is added back to your reported earnings to arrive at Adjusted EBITDA. Common add-backs include owner compensation above market rate, personal expenses run through the business, one-time legal fees, non-recurring equipment costs, and family member salaries without corresponding market-rate duties.

A legal document used when a buyer purchases specific assets of a business, rather than the entire entity, including equipment, inventory, customer contracts, trade names, and intellectual property. Asset sales are generally preferred by buyers for tax and liability reasons.

A transaction structure in which the buyer purchases specific assets of a business rather than the legal entity (shares or membership interests). In an asset sale, the seller retains the legal entity and any liabilities not explicitly transferred.

A structured sale process in which a business is marketed to multiple buyers simultaneously, with the goal of creating competitive tension that maximizes the seller’s price and terms. Most quality M&A advisors run a modified auction when representing sellers.

A financial statement showing a company’s assets, liabilities, and equity at a specific point in time. Buyers review your balance sheet to assess working capital, debt obligations, asset quality, and the overall financial health of the business.

A licensed financial intermediary registered with FINRA and the SEC that is authorized to engage in securities transactions, including advising on and facilitating the sale of businesses above certain thresholds. Not all M&A advisors are registered broker-dealers.

An intermediary who facilitates the buying and selling of businesses, typically smaller companies (under $5M in enterprise value). Business brokers often work on commission and may represent both buyers and sellers in the same transaction, which creates inherent conflicts of interest.

A formal analysis that estimates the market value of a business using multiple methodologies including earnings multiples, discounted cash flow analysis, and comparable transaction data. A professional valuation is the starting point for every informed exit decision.

A buyer’s written criteria document outlining the specific characteristics of the acquisitions they are actively pursuing including industry, revenue range, EBITDA range, geography, business model, and growth profile. Buyers with well-defined buy boxes move faster and close more deals.

M&A advisory services provided to a buyer who is seeking to acquire a business. Buy-side advisors help buyers identify targets, conduct due diligence, and negotiate acquisition terms. Distinct from sell-side advisory, which represents the seller.

The tax owed on the profit from the sale of a business or asset. Long-term capital gains rates (for assets held more than one year) are significantly lower than ordinary income rates. How your transaction is structured, asset sale vs. stock sale, cash vs. installment, dramatically affects your tax liability.

The combination of financing sources used to fund an acquisition, typically including senior debt, mezzanine debt, and equity. Understanding the capital stack helps sellers understand how a buyer is financing a deal and what that means for deal certainty and closing risk.

A transaction in which a parent company sells a division, subsidiary, or business unit to a buyer. The sold entity is ‘carved out’ of the larger organization. Carve-outs are complex because the divested business often shares systems, personnel, and infrastructure with the parent.

A clause in contracts, leases, or loan agreements that is triggered when the ownershipof a business changes hands. Change of control provisions can require consent from customers, landlords, lenders, or partners, and failing to identify them before a sale can kill or significantly complicate a transaction.

The final step in a business sale transaction, at which legal documents are executed, funds are transferred, and ownership formally changes hands. The period between Letter of Intent execution and closing typically takes 60 to 120 days.

A detailed document prepared by the seller (or their advisor) that describes the business in depth for prospective buyers including financial performance, operations, competitive position, management team, and growth opportunities. The CIM is shared only after an NDA is executed.

The degree to which a business’s revenue is dependent on a small number of customers. High customer concentration, typically when one customer represents more than 15-20% of revenue, is one of the most significant value detractors in an industrial business sale. Buyers discount heavily for this risk.

The terms and form of a transaction, including how the purchase price is paid (cash at close, earnout, equity rollover, seller note), how the business is legally transferred (asset sale vs. stock sale), and what post-closing obligations apply to the seller.

A common transaction assumption meaning the buyer acquires the business without assuming its existing debt and without retaining its excess cash. The purchase price is then adjusted at closing to account for the actual levels of debt and cash present on the balance sheet.

A valuation methodology that estimates the present value of a business based on it’s projected future cash flows, discounted back to today’s dollars using an appropriate rate of return. DCF analysis is most useful for businesses with predictable, growing cash flows.

The comprehensive investigation a buyer conducts after a Letter of Intent is signed to verify the accuracy of everything the seller has represented about the business. Due diligence covers financials, legal, operations, employees, technology, environmental, and more. This is where unprepared sellers lose price and deals fall apart.

A portion of the purchase price that is paid to the seller after closing based on the business’s performance against agreed-upon targets, typically revenue or EBITDA. Earnouts transfer risk from the buyer to the seller and are common when there is a disagreement about future performance.

Earnings Before Interest, Taxes, Depreciation, and Amortization. The most commonly used measure of a business’s operating profitability and the primary basis for most lower-middle-market valuations. When a buyer says ‘we pay X times.’ X is a multiple of EBITDA.

The number by which a buyer multiplies your EBITDA to arrive at a enterprise value (purchase price). For lower-middle-market industrial businesses with clean financials and recurring revenue command higher multiples.

The total value of a business, calculated as equity value plus net debt. In most lower-middle-market transactions, the purchase price is stated as enterprise value, which is then adjusted at closing for actual debt and cash on the balance sheet.

When a seller retains a minority ownership stake in the business after selling to a private equity firm. The seller 'rolls' a portion of their equity into the new ownership structure. This is common in PE transactions and gives the seller a second bite at the apple, participating in future value creation after the initial payout.

The value of a business attributable to its owners, calculated as enterprise value minus net debt. This is the amount the shareholders actually receive in a transaction after debt is repaid.

A portion of the purchase price held back at closing by a neutral third party as security against potential post-closing claims. Escrow amounts typically range from 5% to 15% of deal value and are held for 12 to 24 months.

The process of preparing a business and its owner for an eventual ownership transition. Effective exit planning begins years before a transaction and addresses business value enhancement, personal financial planning, tax strategy, management succession, and buyer identification.

The degree to which a business is prepared to withstand buyer due diligence and close a transaction at maximum value with minimal deal risk. Exit readiness encompasses financial quality, operational documentation, legal hygiene, management depth, and the strength of the seller's growth narrative.

A private investment organization that manages the wealth of a high-net-worth family or group of families. Family offices are active acquirers of stable, cash-flowing lower-middle-market businesses and often offer more flexible deal structures and longer hold periods than traditional private equity firms.

A fee paid to an intermediary who introduces a buyer and seller that results in a completed transaction. Finder fees are distinct from broker-dealer compensation and are subject to specific legal requirements depending on the nature of the transaction and the parties involved.

A provision in equity agreements that protects an investor from dilution in a down round. Relevant to sellers who retain equity or receive equity consideration as part of a transaction.

A term indicating that a business is operating normally and expected to continue operating for the foreseeable future. Buyers acquire businesses on a going concern basis, meaning they expect the business to continue generating revenue and cash flow after the transaction.

The intangible value of a business beyond its identifiable physical and financial assets, including brand reputation, customer relationships, employee expertise, and market position. Goodwill is calculated as the purchase price minus the fair market value of net identifiable assets and is amortized over time for accounting purposes.

Private capital invested in established, growing businesses that do not require a full buyout. Growth equity investors take a minority stake and provide capital to accelerate growth, through new hires, geographic expansion, product development, or acquisitions. An alternative to a full sale for owners who want capital and expertise without giving up control.

A contractual obligation by the seller to compensate the buyer for losses resulting from breaches of representations and warranties made in the purchase agreement. Indemnification obligations typically survive closing for one to three years and are often limited to the escrow amount.

An M&A professional who sources, structures, and closes acquisitions on a deal-by-deal basis without managing a committed investment fund. Independent sponsors raise equity capital for each transaction separately and often bring specific operational expertise to their acquisitions. They tend to move faster and structure more creatively than traditional PE funds.

A transaction structure in which the seller receives a portion of the purchase price over time rather than entirely at closing. An installment sale can reduce the seller's immediate tax burden but creates ongoing credit risk, the seller is effectively lending money to the buyer.

A licensed financial professional who advises on mergers, acquisitions, capital raises, and other corporate transactions. In the lower middle market, investment bankers at boutique advisory firms typically run sell-side processes for businesses with $5M to $100M in enterprise value.

A non-binding written expression of a buyer's preliminary interest in acquiring a business, including a proposed valuation range and general transaction structure. An IOI is typically submitted early in a sale process, before detailed due diligence, and is less formal than a Letter of Intent.

The degree to which a business's value, customer relationships, or operational capability depends on a single individual, usually the owner. High key person dependency is one of the most common issues identified during due diligence and one of the most significant value detractors for industrial businesses.

A non-binding document that outlines the principal terms of a proposed acquisition, including purchase price, deal structure, exclusivity period, and key conditions. The LOI is the pivotal document in a transaction; once signed, the buyer typically receives an exclusivity period during which the seller cannot negotiate with other buyers.

An acquisition that is funded primarily with debt, using the acquired company's cash flows and assets as collateral. Private equity firms typically use leverage to amplify their returns. The amount of leverage available for a given transaction depends on the quality and predictability of the business's cash flows

The segment of the private M&A market typically defined as businesses with annual revenues between $5M and $100M and enterprise values between $5M and $75M. This is the most active segment of the M&A market by transaction count and the primary market NexusGate serves.

A transaction in which the existing management team acquires ownership of the business, typically funded with a combination of personal equity, seller financing, and institutional debt or equity. MBOs are an alternative to a third-party sale and can be appropriate when the owner wants to transition to specific people they trust.

A formal meeting between the seller's management team and prospective buyers, typically conducted after the CIM has been reviewed and initial interest has been expressed. The management presentation is where buyers assess the quality of the leadership team and the credibility of the business's growth story.

The prevailing EBITDA multiple being paid for businesses in a given industry, size range, and quality tier. Market multiples fluctuate with interest rates, PE dry powder levels, and sector activity. Understanding current market multiples is essential for setting realistic price expectations.

The broad category of corporate transactions involving the combination of companies (mergers) or the purchase of one company by another (acquisitions). In the lower middle market, the vast majority of transactions are acquisitions, one party buying another, rather than true mergers.

A hybrid form of capital that sits between senior debt and equity in a company's capital structure. Mezzanine financing carries higher interest rates than senior debt and often includes equity warrants. It is used in acquisitions when senior debt alone is insufficient to fund the purchase price.

A legal contract that prohibits a party from disclosing confidential information received during the course of evaluating a business for acquisition. NDAs are signed before any financial information or identifying details about the business are shared with potential buyers.

Current assets minus current liabilities, a measure of a business's short-term liquidity and operational health. In most transactions, a target NWC level is negotiated as part of the deal, and the purchase price is adjusted at closing if actual NWC is above or below that target.

Financial results that have been adjusted to remove unusual, non-recurring, or owner-specific items so that the earnings reflect what a typical owner or buyer would expect the business to generate. Normalized earnings form the basis for business valuation.

A post-closing contractual restriction prohibiting the seller from competing with the business they sold for a defined period of time and within a defined geography. Non-competes are standard in business sale transactions and directly affect the seller's ability to return to the industry after exit.

A business owner who is actively involved in the day-to-day management and operations of their company. Most lower-middle-market industrial businesses are owner-operated, which creates both value opportunities (direct customer relationships, operational expertise) and value risks (key person dependency, transition complexity).

The portion of an owner's total compensation that exceeds what a market-rate general manager would be paid to perform the same role. This excess compensation is added back to reported earnings to calculate Adjusted EBITDA. Correctly identifying and documenting this add-back can meaningfully increase your stated earnings and therefore your valuation.

An initial acquisition made by a private equity firm to establish a presence in a new industry or market segment. The platform company serves as the foundation for future add-on acquisitions. Platform businesses typically command higher multiples than add-ons because the buyer is acquiring strategic capability, not just cash flow.

Investment firms that raise capital from institutional investors and use it to acquire, improve, and sell private companies. PE firms typically hold businesses for three to seven years before selling. They bring operational expertise, growth capital, and strategic networks — but also introduce financial leverage and return pressure that changes how the business is managed.

A post-closing change to the purchase price based on the actual financial condition of the business at closing compared to an agreed-upon target. Common adjustments include working capital true-ups, debt payoffs, and cash retention provisions.

The assignment of the total purchase price to specific assets and liabilities for tax and accounting purposes. How the purchase price is allocated significantly affects the seller's tax liability and the buyer's depreciation and amortization benefits. This is one area where having a qualified CPA is non-negotiable.

An independent accounting analysis — prepared by a third-party CPA firm — that verifies the accuracy and sustainability of a business's reported earnings. QoE reports are standard in transactions above $5M and are typically requested by buyers before finalizing an offer. Sellers who commission a sell-side QoE before going to market arrive at the table in a much stronger position.

A transaction in which the ownership structure or capital structure of a business is restructured, often involving a partial sale to a PE firm in exchange for cash and continued equity ownership. A recapitalization allows an owner to take chips off the table while retaining a stake in future growth.

Revenue that is contractually obligated or highly predictable from period to period, subscriptions, maintenance contracts, service retainers, and similar arrangements. Recurring revenue is highly valued by buyers because it reduces uncertainty. Businesses with a high percentage of recurring revenue command meaningfully higher multiples than purely transactional businesses.

Statements made by the seller in the purchase agreement asserting that specific facts about the business are true as of closing. If a rep or warranty is found to be inaccurate after closing, the seller may be liable to the buyer for resulting losses. Understanding your reps and warranties before signing is critical.

An acquisition strategy in which a PE firm or strategic acquirer makes multiple acquisitions in a fragmented industry with the goal of creating a larger, more valuable combined entity. Many industrial distribution, services, and manufacturing sectors are active roll-up targets. Being acquired as part of a roll-up can mean a premium price but also a more complex integration.

Government-backed financing commonly used to fund acquisitions of businesses under approximately $5M in enterprise value. SBA 7(a) loans offer favorable terms for qualified buyers and are the primary financing mechanism for smaller transactions. Understanding whether your business is likely to be acquired with SBA financing affects how you evaluate offers and buyers.

An investment vehicle funded by a small group of investors to support an entrepreneur in searching for, acquiring, and operating a single business. Search fund buyers are typically highly educated, motivated operators looking for their first business to lead. They often offer clean, fast transactions and genuine commitment to the long-term success of the business they acquire.

A portion of the purchase price paid by the buyer to the seller over time in the form of a promissory note, rather than cash at closing. Seller notes are common in smaller transactions and can bridge valuation gaps, but they expose the seller to credit risk if the buyer struggles post-closing.

M&A advisory services provided to a business owner who is selling their company. A sell-side advisor represents the seller's interests exclusively throughout the process, from preparing the business for market through negotiating and closing the transaction.

Standard Industrial Classification and North American Industry Classification System codes, standardized numerical identifiers assigned to businesses based on their primary economic activity. Buyers and deal databases use these codes to screen acquisition targets. Knowing your codes helps you understand how buyers categorize and search for businesses like yours.

A transaction structure in which the buyer acquires the ownership interests (shares or LLC membership interests) of the legal entity rather than its individual assets. In a stock sale, all assets and liabilities of the business transfer to the buyer automatically. Generally preferred by sellers for tax reasons; generally less preferred by buyers due to inherited liability exposure.

A company that acquires another business to achieve a specific strategic objective, geographic expansion, product line extension, customer base growth, or talent acquisition. Strategic buyers often pay higher multiples than financial buyers because they can capture synergies that purely financial buyers cannot.

A brief, anonymous one-to-two page summary of a business that is shared with prospective buyers before an NDA is executed. The teaser describes the business in general terms sufficient for a buyer to decide whether they want to learn more — without revealing the company's identity or confidential financial details.

A non-binding document outlining the proposed terms of a transaction, similar to a Letter of Intent but typically less detailed. Term sheets are more common in financing transactions; LOIs are the standard in M&A.

See Enterprise Value. TEV is sometimes used interchangeably with EV to emphasize that the valuation encompasses all claims on the business: debt, equity, and preferred interests.

An attorney with specific experience in M&A transactions who drafts, reviews, and negotiates the legal documents associated with a business sale, including the purchase agreement, reps and warranties, and closing documents. Transaction counsel is distinct from a general business attorney and is essential for any deal above $1M in value.

The most recent 12-month period of financial performance, used to calculate the most current EBITDA for valuation purposes. TTM EBITDA is often the most relevant figure for valuation because it reflects where the business is today, not just where it was in the last fiscal year.

An acquisition inquiry initiated by a buyer without the seller having formally marketed the business for sale. Unsolicited offers are common in active industrial sectors and are often below what a properly run sale process would achieve. Receiving an unsolicited offer is not the same as having found the best buyer, it means you have found A buyer.

The difference between what a seller believes their business is worth and what a buyer is willing to pay. Valuation gaps are closed through negotiation, deal structure creativity (earnouts, seller notes, equity rollovers), or additional preparation that justifies a higher price.

The specific analytical approach used to estimate the value of a business. The three most common methodologies are the earnings multiple approach (most common in lower middle market), discounted cash flow analysis, and the asset-based approach.

A specific characteristic of a business that increases its value in the eyes of a buyer. Common value drivers in industrial businesses include recurring revenue, long-tenured customer relationships, strong management depth, proprietary processes or technology, defensible market position, and clean financial documentation.

Actions taken by a business owner to increase the market value of their company before going to market. Value enhancement typically involves addressing the issues identified in an exit readiness assessment, reducing customer concentration, reducing key person dependency, cleaning up financials, and strengthening the management team.

A secure online platform used to store and share confidential business documents with prospective buyers during the due diligence process. A well-organized VDR signals professionalism and preparedness and dramatically accelerates the due diligence timeline.

An insurance product that covers losses arising from breaches of representations and warranties in a purchase agreement. W&I insurance is increasingly common in middle market transactions as an alternative to large escrow holdbacks. It allows sellers to receive more cash at closing and limits post-closing liability exposure.

Current assets minus current liabilities — the capital available to fund day-to-day business operations. In M&A transactions, working capital is typically a key negotiation point. Buyers expect to receive the business with a 'normal' level of working capital, and the purchase price is adjusted if the actual level deviates significantly at closing.

The agreed-upon target level of net working capital to be delivered at closing. If the actual NWC at closing is above the peg, the seller receives more; if it is below, the buyer receives a credit. Setting an accurate peg is one of the most technically complex parts of a transaction negotiation.