M&A Glossary — Business Acquisition Terms Explained
A comprehensive glossary of mergers and acquisitions terminology, with Swiss-specific context. Whether you're buying or selling a business in Switzerland, these definitions will help you navigate the process.
A
B
- Break-up Fee
- A penalty payment agreed upon in the LOI or SPA that compensates one party if the other withdraws from the deal without justified cause. Break-up fees typically range from 1-3% of the transaction value and are designed to discourage parties from walking away after significant due diligence costs have been incurred.
C
- Cap Table
- Short for capitalization table — a detailed breakdown of a company's ownership structure showing all shareholders, their share classes, and ownership percentages. Essential for understanding who controls the business and what approvals are needed to complete a sale.
- CIM (Confidential Information Memorandum)
- A comprehensive document prepared by the seller (or their advisor) that provides detailed information about the business to prospective buyers. It typically includes financial statements, business operations, market position, and growth opportunities. On Alpine Business Exchange, CIM access requires a signed NDA.
- Closing
- The final step of an acquisition where ownership is officially transferred. In Switzerland, closing involves executing the SPA, transferring shares (often via notarized deed for GmbH), paying the purchase price, and filing the ownership change with the Handelsregister (commercial register).
D
- DCF (Discounted Cash Flow)
- A valuation method that estimates the present value of a business based on its projected future cash flows, discounted back at an appropriate rate (typically WACC). DCF is one of the primary methods used in Alpine Business Exchange's AI valuation engine alongside comparable multiples.
- Due Diligence
- The comprehensive investigation and analysis of a target business before acquisition. Covers financial records, legal compliance, tax filings, contracts, employee matters, IP, and operations. In Swiss transactions, due diligence typically takes 4-8 weeks and may include specific checks for cantonal regulations and permits.
E
- Earnout
- A deal structure where part of the purchase price is contingent on the business achieving certain performance targets (revenue, EBITDA, customer retention) after the sale. Earnouts bridge valuation gaps between buyers and sellers and are common in Swiss SME transactions, typically spanning 1-3 years.
- EBITDA
- Earnings Before Interest, Taxes, Depreciation, and Amortization — the most widely used profitability metric in M&A. EBITDA represents a company's core operating performance, stripped of financing and accounting decisions. Swiss SMEs typically trade at 3-7x EBITDA depending on industry, size, and growth.
- Enterprise Value
- The total value of a business including both equity and net debt. Calculated as equity value plus debt minus cash. Enterprise value represents what it would cost to acquire the entire business and is the basis for EV/EBITDA multiples used in valuation.
- Equity Value
- The value of a business attributable to its shareholders, calculated as enterprise value minus net debt. This is the actual price a buyer pays for the shares. Also known as the 'headline price' in deal announcements.
- Escrow
- A financial arrangement where a portion of the purchase price (typically 5-15%) is held by a neutral third party for a set period after closing. Escrow protects the buyer against undisclosed liabilities or breaches of representations and warranties discovered post-closing.
H
- Handelsregister (Swiss Commercial Register)
- Switzerland's official public register of companies, maintained at the cantonal level. All share transfers for GmbH companies and board changes must be registered here. The Handelsregister is publicly accessible and provides transparency on company ownership, directors, and authorized signatories.
- Holding Company
- A company whose primary purpose is to own shares in other companies. In Swiss M&A, holding structures are commonly used for tax-efficient acquisitions, as Switzerland offers participation exemptions on qualifying dividend income and capital gains from subsidiary shareholdings.
I
- Indemnification
- A contractual obligation where the seller agrees to compensate the buyer for specific losses arising from breaches of representations and warranties or undisclosed liabilities. Indemnification clauses in the SPA define the scope, caps, baskets, and time limits for post-closing claims.
K
- Key Person Risk
- The risk that a business's value is heavily dependent on one or a few individuals — often the founder or owner. High key person risk is a common concern in Swiss SME acquisitions and is factored into Alpine Business Exchange's AI deal scoring. Transition periods and earnouts help mitigate this risk.
L
- Letter of Intent (LOI)
- A preliminary, typically non-binding agreement between buyer and seller outlining the key terms of the proposed acquisition (price, structure, timeline, exclusivity). In Switzerland, the LOI signals serious intent and usually grants the buyer an exclusivity period to conduct due diligence.
- Liquidation Preference
- A clause that determines the order and amount of payouts to different shareholder classes if the company is liquidated or sold. More common in venture-backed companies, liquidation preferences ensure preferred shareholders recover their investment before common shareholders receive proceeds.
M
- MBI (Management Buy-In)
- An acquisition where an external management team purchases and takes over a company. MBIs are common in Swiss succession situations where the departing owner has no internal successor. The incoming manager-buyer often combines personal equity with bank financing to fund the purchase.
- MBO (Management Buy-Out)
- An acquisition where the company's existing management team purchases the business from the current owners. MBOs are a popular succession solution in Switzerland, as the management team already knows the business, reducing transition risk and maintaining continuity for employees and customers.
N
- NDA (Non-Disclosure Agreement)
- A Non-Disclosure Agreement (NDA) is a legally binding contract that prevents the receiving party from sharing confidential information. On Alpine Business Exchange, buyers sign a Confidentiality Agreement before accessing sensitive business details such as financials, customer data, and seller identity. This protects sellers throughout the transaction process.
- Net Working Capital
- Current assets minus current liabilities — representing the short-term operational liquidity of a business. In Swiss M&A, the SPA typically defines a target net working capital level, with the purchase price adjusted up or down based on the actual figure at closing.
- Non-Compete Agreement
- A contractual clause preventing the seller from starting or joining a competing business for a defined period (typically 2-5 years) and geographic area after the sale. In Switzerland, non-compete clauses must be reasonable in scope and duration to be enforceable under Swiss labor and contract law.
- Normalized Earnings
- A company's earnings adjusted to remove one-time, non-recurring, or owner-specific expenses (e.g., above-market owner salary, personal expenses run through the business). Normalization gives a clearer picture of the business's true earning power and is essential for accurate valuation.
R
- Representations & Warranties
- Statements of fact made by the seller (and sometimes the buyer) in the SPA about the condition of the business — covering financials, legal compliance, tax status, contracts, and more. Breaches of reps and warranties can trigger indemnification claims after closing.
- Revenue Multiple
- A valuation method that values a business as a multiple of its annual revenue. Used primarily for high-growth or pre-profit businesses where EBITDA multiples are less meaningful. Swiss SaaS companies, for example, may trade at 2-6x annual recurring revenue.
S
- SDE (Seller's Discretionary Earnings)
- A measure of a business's earnings that adds back the owner's salary, benefits, and discretionary expenses to net profit. SDE is the most common valuation metric for smaller owner-operated businesses and is used in Alpine Business Exchange's AI valuation for businesses under CHF 2M revenue.
- SPA (Share Purchase Agreement)
- The definitive legal contract governing the sale of a company's shares. The SPA details the purchase price, payment terms, representations and warranties, indemnification, closing conditions, and post-closing obligations. In Switzerland, SPAs for GmbH shares must be notarized.
- Succession Planning (Nachfolgeplanung)
- The process of preparing a business for ownership transition — whether to family members, employees, or external buyers. With over 80,000 Swiss SMEs facing succession challenges in the coming decade, Nachfolgeplanung is one of the most critical issues in the Swiss business landscape.
V
- Valuation Multiple
- A ratio used to value a business by comparing it to similar companies or transactions. Common multiples include EV/EBITDA, EV/Revenue, and Price/Earnings. Alpine Business Exchange's AI uses Swiss-specific multiples calibrated to industry, size, and cantonal market conditions.
- Vendor Due Diligence
- A due diligence process initiated by the seller before going to market. The seller commissions an independent review of their own business to identify and address issues proactively. Vendor DD can accelerate the sales process and build buyer confidence, and is increasingly common in Swiss mid-market transactions.
W
- WACC (Weighted Average Cost of Capital)
- The blended rate of return required by all capital providers (debt and equity). WACC is used as the discount rate in DCF valuations. For Swiss SMEs, WACC typically ranges from 8-15%, reflecting the higher risk compared to large publicly traded companies.
- Wirtepatent (Swiss Hospitality License)
- A cantonal license required to operate a restaurant, bar, or hotel in many Swiss cantons. The Wirtepatent requires passing an exam covering food safety, alcohol regulations, and business management. When acquiring a hospitality business in Switzerland, verifying the transferability of the Wirtepatent is a critical due diligence step.
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