Series 79 key terms

Earnings before interest, taxes, depreciation, and amortization. A rough proxy for operating cash earnings that analysts use to compare companies and to set valuation multiples.

The total value of a business, calculated as market capitalization plus debt and preferred stock minus cash. It is the numerator in multiples such as enterprise value to EBITDA.

Cash generated by operations after capital expenditures and working capital needs, showing how much money a business has for debt repayment, dividends, acquisitions, or reinvestment.

A valuation method that applies trading multiples, such as enterprise value to EBITDA, from publicly traded peers to the subject company's metrics to estimate what it is worth.

A valuation approach that projects future free cash flows and discounts them to present value at a rate reflecting risk, producing an estimate of intrinsic value.

A diligence analysis that tests whether reported earnings are sustainable, separating recurring operating results from one-time gains, accounting estimates, and aggressive revenue recognition.

The investigation of a target's financial, legal, tax, and operating records before a transaction, used to confirm assumptions, uncover liabilities, and support valuation and contract terms.

A post-closing true-up that compares the target's actual working capital at closing with an agreed target amount, shifting cash between buyer and seller.

The difference between the price an underwriter pays the issuer for new securities and the price at which those securities are resold to investors. It compensates the syndicate.

A group of investment banks that jointly purchase or place a new issue, sharing risk and distribution obligations in proportions set by an agreement among underwriters.

An arrangement in which the underwriter buys the entire issue from the issuer and then resells it, bearing the risk that it must sell shares at a loss.

An arrangement in which the underwriter acts as agent and agrees to sell as much of the issue as it can, without committing to buy any unsold securities.

Also called a greenshoe, a provision letting underwriters sell a set percentage more shares than the base offering to cover excess demand and stabilize the aftermarket.

The process of collecting indications of interest from institutional investors during marketing so the underwriters can set the offering price and allocate shares.

Short-term financing used to fund a transaction, such as an acquisition, until longer-term debt or equity can be raised or an asset is sold.

The legal agreement between a bond issuer and a trustee that sets the terms of the issue, including maturity, interest, redemption rights, covenants, and default remedies.

A contract that bars company insiders and pre-offering holders from selling shares for a set period after an offering, protecting the stock price from immediate supply.

The first sale of a company's stock to public investors, which raises capital, creates a listed trading market, and subjects the company to reporting duties.

A public sale of shares by existing holders rather than by the issuer, so the proceeds go to the selling shareholders and the company receives nothing.

A filing under Rule 415 that registers securities in advance so the issuer can sell them in tranches over up to three years as market conditions allow.

A safe harbor allowing resale of restricted securities to large institutional buyers known as QIBs without registration, widely used for high-yield debt and equity placements.

SEC rules providing registration exemptions for private placements, including Rule 506, which permits sales to accredited investors and a limited number of others.

An individual or institution meeting SEC income, net worth, or entity standards who may buy securities in private placements that carry reduced disclosure obligations.

The SEC rule setting holding periods, volume limits, and filing conditions under which affiliates and holders of restricted securities may resell them publicly.

A preliminary prospectus circulated before the registration is effective that describes the offering and the company but omits the final price and share count.

A usually nonbinding summary of proposed deal terms, such as price range and structure, that guides diligence and the drafting of a definitive agreement.

A structure in which a buyer's newly formed subsidiary merges into the target, leaving the target as the surviving subsidiary and preserving its contracts, licenses, and tax attributes.

Contingent consideration paid to sellers if the acquired business hits agreed financial targets after closing, used to bridge a gap between buyer and seller valuations.

A closing condition letting a buyer terminate if the target suffers a severe, durationally significant decline in business, financial condition, or results of operations.

A test comparing the acquirer's earnings per share with and without a proposed deal to judge whether the transaction increases or decreases reported EPS.

A premerger notification to federal antitrust agencies required when a deal exceeds size thresholds, starting a waiting period that must pass before closing.

An investment bank's written conclusion that the financial terms of a transaction are fair to shareholders from a financial point of view, often attached to the proxy.

A public offer to buy shares from holders, usually at a premium to the market price, often used to acquire control or to repurchase stock.

A filing due within five business days after a person acquires more than 5% of a voting class with control intent, disclosing identity, plans, and financing.

A target company's disclosure telling shareholders whether its board recommends accepting or rejecting a tender offer, with reasons and any conflicts of interest.

An offer to swap existing securities for new ones, such as new bonds for old bonds with longer maturities, frequently used in out-of-court restructurings.

A Chapter 11 filing made with a reorganization plan already negotiated and voted on by creditors, which shortens and de-risks the stay in court.

New money lent to a company operating in Chapter 11, given priority over existing debt, to fund operations and professional costs until a plan is confirmed.

Confirmation of a reorganization plan over the objection of a dissenting creditor class, allowed only if the plan meets statutory fairness and priority tests.