CEPA flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Value Acceleration Methodology
- A four-stage exit planning framework-discover, prepare, decide, execute-that helps owners build transferable value and align business, personal, and financial goals before a transition.
- Value gap
- The difference between a company's current enterprise value and the value needed or attainable to meet the owner's exit objectives.
- Three legs of exit planning
- Business value, personal financial readiness, and life after business; all three must be addressed for a successful owner transition.
- Owner dependence
- A condition where business results rely on the owner's relationships, decisions, or skills, reducing transferable value and increasing buyer risk.
- Owner engagement
- The process of aligning the owner's goals, timeline, risk tolerance, and financial needs before designing and implementing an exit plan.
- Exit planning assessment
- A structured diagnostic that evaluates business value, personal readiness, and owner objectives to identify gaps and prioritize actions.
- Written exit plan
- A documented roadmap specifying owner objectives, value gaps, initiatives, responsible parties, deadlines, and review cadence.
- Advisory team kickoff
- An initial meeting where advisors confirm scope, roles, communication protocols, confidentiality, and the owner's prioritized exit objectives.
- Enterprise value
- The total value of a business to all capital providers, commonly calculated as equity value plus interest-bearing debt minus cash.
- Income approach
- A valuation method that converts expected future cash flows or earnings into present value using discounting or capitalization techniques.
- Market approach
- A valuation method that estimates value by comparing the subject company with similar businesses using transaction or guideline public company multiples.
- Normalization adjustments
- Adjustments that remove owner-specific, nonrecurring, or nonoperating items from financial statements to reveal sustainable economic earnings.
- Human capital
- The knowledge, skills, motivation, and productivity of employees; strong human capital reduces owner dependence and supports transferable value.
- Customer capital
- The value embedded in customer relationships, loyalty, recurring revenue, and diversified demand; concentration weakens transferability and raises buyer risk.
- Structural capital
- Documented systems, processes, intellectual property, and data that allow the business to operate independently of specific individuals.
- Harvest intangible capital
- The stage of converting built intangible assets into realized value through growth, licensing, strategic partnerships, or a sale transaction.
- Personal financial readiness
- The owner's ability to fund post-exit lifestyle, taxes, debt, and contingencies from diversified resources rather than ongoing business income.
- Life after business plan
- A written plan covering how the owner will spend time, maintain identity and relationships, and find purpose after leaving the company.
- Required exit proceeds
- The after-tax liquidity needed to fund retirement cash flow, debts, taxes, and contingencies, often estimated from a personal financial model.
- Liquidity event gap
- The shortfall between expected after-tax sale proceeds and the capital required to meet the owner's personal financial goals.
- Third-party sale
- A transaction selling the company to an unrelated buyer, typically offering the highest potential price but requiring loss of control and buyer due diligence.
- Internal transfer
- A sale to family members, managers, or employees that preserves continuity and culture but often requires seller financing or gradual ownership transition.
- Employee stock ownership plan
- A qualified retirement plan that buys company stock for employees; it can provide owner liquidity and tax benefits but requires feasibility and ongoing compliance.
- Recapitalization
- A partial sale or restructuring with an investor, providing liquidity and retaining equity upside while shifting governance and control terms.
- Capital gains treatment
- Taxation of profit from selling a capital asset at preferential rates when holding-period and asset-type requirements are met.
- Installment sale
- A transaction where the seller receives payments over time and recognizes gain as principal is collected, spreading tax liability.
- Buy-sell agreement
- A legal contract governing ownership transfers on death, disability, divorce, or exit, often funding purchases with insurance or installment terms.
- Section 1042 rollover
- A tax deferral provision allowing eligible shareholders selling stock to an ESOP to reinvest proceeds in qualified replacement property under certain conditions.
- Lead exit advisor
- The professional who coordinates the owner's exit planning process, aligns specialists, manages timelines, and serves as the owner's primary point of contact.
- Advisory team roles
- Defined responsibilities for legal, tax, valuation, M&A, wealth, and insurance advisors to prevent duplication, gaps, and conflicting advice.
- Engagement letter
- A written agreement specifying an advisor's scope, deliverables, fees, timeline, confidentiality, and limits of responsibility in the exit process.
- Confidentiality protocol
- Rules governing how sensitive owner and business information is shared among advisors, including need-to-know access and non-disclosure agreements.