Resources
M&A glossary for business acquirers
QoE, SDE, DSCR, CADS, NIS, NBS, peg, CCC, GRR, NRR and the rest, defined the way lenders and investors use them, one entry for each term.
Educational guide, not advice. This guide is general information, not investment, legal, tax, accounting, lending or valuation advice. Rules, ratios, prices and worked figures are stated as of the date shown, are drawn from public sources and our own experience, and can be out of date or wrong; they are not a substitute for a lender's, regulator's or program's current rules. Verify any figure with its primary source and a qualified professional before acting on it.
Earnings
- Add-back
An expense taken out of reported earnings because a new owner will not carry it: owner compensation above a replacement salary, one-time costs, non-cash charges and discretionary spending, each with its evidence.
More: QoE add-backs
- Adjusted EBITDA
EBITDA after applying QoE normalizations and add-backs; the primary valuation anchor.
More: Quality of Earnings
- CAPEX
Capital Expenditure
Investment in fixed assets.
- Cash proof
A financial analysis that reconstructs cash receipts and disbursements by reconciling bank statement data to the income statement and tax return for each period under review.
Part of the lender's Quality of Earnings on an SBA 7(a) acquisition at a Business Purchase Price of $3 million or more, on the trailing twelve months and the last two fiscal years (SOP 50 10 8.1, Appendix 15, Para. C.1). It is the QoE firm's work.
More: What a QoE buys
- COGS
Cost of Goods Sold
The direct cost of what the business sells. Used for gross profit, DIO and DPO.
- Confirmed EBITDA
The deal's baseline EBITDA, entered by hand, reported by the seller or taken from a QoE review; the chip beside it shows which.
- D&A
Depreciation and Amortization
The non-cash charges for the wear of fixed assets and the write-down of intangibles.
- EBIT
Earnings Before Interest and Taxes
Operating profit, before interest and income tax.
- EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortization
Operating profit before interest, tax and non-cash charges; the usual base for transaction multiples.
- EBT
Earnings Before Tax
Pre-tax income, after interest and before income tax.
- NOPAT
Net Operating Profit After Tax
Operating profit after tax, as if the business carried no debt.
- QoE
Quality of Earnings
A financial due diligence analysis normalizing reported income.
More: What a QoE buys
- SDE
Seller's Discretionary Earnings
EBITDA with the owner's salary and discretionary costs added back.
More: SDE vs EBITDA
Valuation
- Asset Value
Business value derived from the fair market value of net assets.
- Asking Price
The seller's stated price for the business.
- Comparable / Comp
A publicly available or private transaction used to benchmark valuation multiples.
More: Valuation
- DCF
Discounted Cash Flow
A valuation method using projected future cash flows.
- EV
Enterprise Value
Total business value (equity plus net debt).
- EV/EBITDA
Enterprise Value divided by EBITDA
The primary transaction multiple.
- Equity/SDE
Equity Value divided by SDE
The small-business multiple, quoted on equity rather than enterprise value.
Applying it gives the price of the business directly.
- Gordon Growth Model
Terminal value formula: FCF × (1 + g) ÷ (WACC − g).
- IRR
Internal Rate of Return
The annual return at which an investment's cash flows net to zero in today's money.
- MOIC
Multiple on Invested Capital
Total value returned divided by the capital invested.
- PV (Present Value)
A future cash flow discounted back to today.
The DCF shows the PV of the forecast period and the PV of the terminal value.
- Terminal Value (TV)
The estimated value of all cash flows beyond the projection period.
- Triangulated Value
A weighted blend of Market, DCF, and Asset valuation methods.
More: Valuation
- UFCF
Unlevered Free Cash Flow
Cash flow before debt payments, used in the DCF.
Acquiror AI computes it for each projection year as EBITDA − Capital Expenditure − Cash Taxes − Working Capital Investment.
- WACC
Weighted Average Cost of Capital
The discount rate used in the DCF.
Debt and financing
- Annual Debt Service
Total principal and interest due in a year on the debt instruments marked Included in DSCR.
Shown as Annual DS on the Financing tab.
More: Financing and DSCR
- CADS (Cash Available for Debt Service)
The numerator of DSCR: the cash left to pay lenders after capex, taxes and working capital.
Adjusted EBITDA − Maintenance Capex − Cash Taxes − Change in Working Capital − Other Outflows. The SOP 50 10 8.1 floor test divides EBITDA by post-transaction debt service, with each lender adjustment justified in the credit memorandum (Appendix 15, Para. C.2.b), so this CADS basis is the product's and your lender's credit policy, not the SOP's.
More: What is CADS?
- CSBFP
Canada Small Business Financing Program
A government-backed loan program, offered as a financing template on CAD deals.
More: Canadian acquirers
- Debt Capacity
Maximum debt a business can service given its income and DSCR floor.
More: Financing and DSCR
- DS (Debt Service)
Principal plus interest due on a debt instrument in a year. See Annual Debt Service.
- DSCR
Debt Service Coverage Ratio
Cash Available for Debt Service ÷ Annual Debt Service: how many times the cash covers the debt payments.
For an SBA 7(a) acquisition, SOP 50 10 8.1 (effective 1 October 2026) sets a minimum of 1.25:1 for an Initial Acquisition, Owner Buyout or ESOP transaction and 1.15:1 for a Business Expansion, on the last fiscal year or a two-year average, historical or lender-adjusted (Appendix 15, Para. C.2.b); the lender may not rely on projections, except for an owner-occupied special purpose property that fully secures the loan (Para. C.2). Lenders set policy at or above the floor, usually on CADS.
- LTV (Loan-to-Value)
Debt as a percentage of the purchase price.
The Maximum LTV threshold caps the Debt Capacity estimate.
More: Financing and DSCR
- SBA 7(a)
Small Business Administration 7(a) loan
A US loan program commonly used for business acquisitions up to $5M.
Under SOP 50 10 8.1, at a Business Purchase Price of $3 million or more (excluding owner-occupied real estate) on an Initial Acquisition or Business Expansion, the lender must obtain a Quality of Earnings with a cash proof covering the trailing twelve months and the last two fiscal years, and must use its earnings in the coverage test (Appendix 15, Para. C.1).
- SBA 504
Small Business Administration 504 loan
A US program for fixed assets such as real estate and equipment.
- SOP 50 10 8.1
SBA Standard Operating Procedure 50 10, version 8.1
The SBA lender manual for the 7(a) and 504 loan programs; version 8.1, effective 1 October 2026, sets the change-of-ownership rules in Appendix 15.
The coverage floor is 1.25:1 for an Initial Acquisition, Owner Buyout or ESOP transaction and 1.15:1 for a Business Expansion; see DSCR for the basis. The lender-engaged Quality of Earnings applies at a Business Purchase Price of $3 million or more on an Initial Acquisition or Business Expansion; see SBA 7(a).
Working capital
- AP (Accounts Payable)
Money owed to suppliers; a working capital liability.
- AR (Accounts Receivable)
Money owed by customers; a working capital asset.
- CCC (Cash Conversion Cycle)
DSO + DIO − DPO; how long cash is tied up in operations.
More: Working capital
- DIO (Days Inventory Outstanding)
How long inventory sits before being sold.
- DPO (Days Payable Outstanding)
How long the company takes to pay its suppliers.
- DSO (Days Sales Outstanding)
How long it takes to collect receivables.
- NWC (Net Working Capital)
Operating current assets minus operating current liabilities, entered per period on the Working Capital tab.
Current assets are AR, inventory and other current assets; current liabilities are AP, accrued liabilities, deferred revenue and other current liabilities.
More: Working capital
- Working Capital Peg
The contractual working capital target. Delivered above the peg, the buyer pays the excess; below it, the price comes down.
More: Working capital peg
- Working Capital Adjustment
Working capital delivered at closing minus the peg.
In a valuation's equity bridge it is estimated from the most recent Working Capital period, or entered by the analyst as an Override; never the peg itself.
More: Working capital
Revenue
- ACV (Annual Contract Value)
Expected annual revenue, recorded for each customer and each contract on the Revenue Durability tab.
- Gross Retention (GRR)
Gross Revenue Retention
Revenue kept from the prior period's customers, each capped at what it spent before, so it cannot exceed 100%.
More: Revenue durability
- Net Retention (NRR)
Net Revenue Retention
Gross Retention without the cap, so growth at retained customers offsets losses. Can exceed 100%.
More: Revenue durability
- Revenue Durability
The quality, stability, and defensibility of a company's revenue base.
More: Revenue durability
Statements and periods
- FY / FYE
Fiscal Year / Fiscal Year End
The company's 12-month reporting year and the date it closes.
- LTM
Last Twelve Months
The most recent 12-month financial period.
- NBS
Normalized Balance Sheet
The balance sheet restated to remove non-operating and one-time items.
- NIS
Normalized Income Statement
The income statement restated line by line to remove non-recurring and owner-specific items.
- P&L
Profit and Loss statement
The income statement.
- PP&E
Property, Plant and Equipment
The long-lived physical assets on the balance sheet.
- T2
T2 Corporation Income Tax Return
The Canadian corporate income tax return. Upload it as a Tax Return document.
- TTM
Trailing Twelve Months
Same meaning as LTM; one of the period types on the Working Capital tab.
Deal process
- AUM
Assets Under Management
The total value of investments a firm manages.
- CIM
Confidential Information Memorandum
The seller's detailed business summary provided under NDA.
More: Sponsor software stack
- Exclusivity
A period during the LOI when the seller cannot negotiate with other buyers.
- Family Office
A private firm managing the investments of a wealthy family.
- LOI
Letter of Intent
A non-binding offer document setting out deal terms.
- NDA
Non-Disclosure Agreement
A contract keeping shared deal information confidential.
- PE
Private Equity
Investment firms that buy and grow private companies.
- Playbook
A reusable industry question set.
More: Pipeline and decisions
- SPA / APA
Stock Purchase Agreement / Asset Purchase Agreement
The definitive contract that buys either the shares or the assets of the business.
Plans, billing and tax
- Billing Interval
The billing frequency for a subscription: Monthly or Annual. Annual billing typically offers a discount.
- Billing Portal
A self-service portal, hosted by Stripe, where admins manage payment methods, invoices and billing details.
- BYO (Bring Your Own)
An AI Settings mode where your organization uses its own OpenAI or Anthropic key and pays the provider directly.
More: Vera and AI governance
- Entitlement
A feature or resource limit granted by the current subscription plan, such as the number of deals.
- Feature Gate
A restriction that enables or disables a product feature based on the active subscription plan.
- GST / HST / PST / QST
Goods and Services Tax / Harmonized Sales Tax / Provincial Sales Tax / Quebec Sales Tax
Canadian sales taxes. Subscriptions currently collect GST/HST only.
- Proration
A proportional charge or credit when changing plans mid-billing-period.
- Subscription Plan
A pricing tier (Solo, Professional, Firm, Enterprise) that sets feature access, usage limits and cost.
More: Pricing
- Tenant
An isolated workspace for one organization in Acquiror AI.
More: Security
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