Financial Poise

Financial Poise Glossary

Accredited Investor

Accredited Investors are individuals who are allowed by law to invest in private equity, venture capital, hedge funds, and private placements. Regulation D, Rule 501 of the Securities Act of 1933 defines accredited investor as: (a) an individual (or an individual and their spousal equivalent) whose (joint) net worth exceeds $1 million, excluding the value of the primary residence; or (b) an individual with income exceeding $200,000 in each of the two most recent years, or a married couple with joint income exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.

Amendments to the definition now also qualify the following persons and entities as accredited investors:

  • Individuals with certain certifications, designations or credentials issued by an accredited educational institution (members of the public may also propose additional certifications to the Commission for consideration)
  • Holders of licenses Series 7, Series 65 and series 82
  • Knowledgeable employees of a private investment fund
  • LLCs with $5 million in assets
  • SEC- and state-registered investment advisors
  • Family offices with at least $5 million in assets (and their family clients)
  • Any entity in excess of $5 million that wasn’t formed for the purpose of investing in the securities offered (e.g., Indian tribes, governmental bodies, funds)

Alternative Investment

An Alternative Investment is an investment that doesn’t fall under the categories that are considered to be traditional – stocks, bonds and cash. Alternative investments tend to have long investment horizons and to be complex in nature. They are less regulated and are not as liquid as traditional investments.


An Angel is a wealthy individual who invests in entrepreneurial companies. Angels invest their own capital rather than that of institutional and other individual investors although angels perform many of the same functions as venture capitalists.

Assignment and Assumption Agreement

An Asset is any owned resource that has economic value. For alternative investing purposes, assets are tangible items owned by an individual or group that have value that can be converted to cash and are controlled or held for a certain period with the expectation that they will provide future benefit or payoff.

Asset Allocation

An Asset Allocation is the process through which a group of investors or individual investors determine how their investment portfolios should be divided across different asset classes.

Asset Class

An Asset Class is one of the different types of investment categories, such as private equity, tangible assets, venture capital, that institutional and individual investors consider when making decisions on where to invest.

Assignment and Assumption Agreement

An Assignment and Assumption Agreement is an agreement between a seller and buyer by which the seller (the assignor) transfers its rights and obligations under one or more executory contracts to a buyer (the assignee). The assignor may not be completely relieved of potential liability under a contract being assigned.

Audited Financial Statements

Audited Financial Statements are a company’s financial statements prepared and certified by a certified public accountant as meeting the requirements of U.S. General Accepted Accounting Principals. In contrast, “Reviewed Financial Statements” have been reviewed by an accounting firm but that review is not nearly as thorough as is made in connection with an audit. Think of a spectrum in which audited financial statements are the most reliable and reviewed financial statements are the next most reliable. Less reliable are “Compiled Financial Statements,” which are created by an accountant from statements prepared by its client.


Beta measures the correlation between a particular stock and the S&P 500 stock index. Why does it matter? Understanding that correlation also measures volatility. High-beta stocks have greater volatility as the S&P moves up and down, while low-beta stocks have less. Volatility, in this context, is not a bad thing. Nor is it a good thing. It is just an objective fact that you can use to help inform your overall investment decisions.

Bill of Sale

A Bill of Sale is a legal document signed by a seller to evidence the transfer property to a buyer.

Business Broker

A Business Broker is an intermediary who connects buyers and sellers, commonly on a commission basis. Business brokers perform similar functions to investment bankers but do so for smaller companies whereas investment bankers typically work with larger companies.

Business Exit Professional

A Business Exit Professional, also sometimes called an Exit Planning Professional, is an advisor who collaborates with professionals in many specialties, to help business owners determine what they have, what they need, and how to enhance the value of what they have to meet their goals and objectives. In addition and in collaboration with other professionals, they assist in determining when and how to exit a business and help business owners plan for life without the business.

C Corporation

A C Corporation conducts business, realizes net income or loss, pays taxes, and distributes profits to shareholders.The profit of a C corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This results in double taxation; the corporation does not get a tax deduction when it distributes dividends to shareholders and shareholders generally cannot deduct any loss of the corporation.

Capital Expenditures

Capital expenditures (or “CAPEX”) are investments in assets that will have a long life. Examples include the purchase of a building, computer equipment, machinery, office equipment, and vehicles. In accounting terms, the money spent will not run through the income statement directly but will appear on the cash flow statement. Capital investments, or the fixed cost of the purchase, will be depreciated and the depreciation expense will run through the income statement over multiple periods which are equivalent to the useful life of the asset acquired by the company.

Capex differs from a revenue expenditure which, in accounting terms, is used to cover repair and maintenance charges that do not enhance a company’s earning capacity. For example, a company might repair a piece of equipment at a factory, but it will not result in the machine producing any more goods. As a result, the initial purchase of the equipment would be a capital expenditure, while the repair cost would be a revenue expenditure.

Capital Gains

Capital Gains are the profit that results from a disposition or sale of a capital asset. Capital gains are realized when the sale of certain assets, such as stock, or real estate, exceeds the original purchase price. The gain is the difference between a higher selling price and a lower purchase price. Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage investment and entrepreneurship.

Capital Structure

Capital Structure is the mixture of equity and debt that a company has raised.

Carry / Carried Interest

Carry / Carried Interest is a fee paid to maintain the fund an later distribute its profits. The industry standard is referred to as the “2 and 20.” This means that the general partner charges: (a) an annual fee equal to 2% of assets under management plus (b) 20% of the profits of the fund (that is, after the limited partners are paid back their initial investment). The preferred return, when there is one, typically is in the 5-10% range. The 20% sharing of profits is called a “carried interest” and is commonly paid at the end of the life of the fund. If the fund doesn’t become profitable, no carried interest is paid.

Certified Copies

Certified Copies are photocopies of original documents that have an endorsement, seal,or certificate from a government office or municipality. The endorsement serves to assure that the copy is a true copy of the original document. It does not certify that the original document is genuine, only that that the copy is a true duplicate of the original document.

Closing Conditions

As explained by Lexology, “In the event there is a period of time between the signing of a definitive acquisition agreement and the closing of the acquisition, the parties will have to agree on a set of conditions that must be satisfied (or waived) before the acquisition may be closed. These conditions are generally referred to as “closing conditions.”

The failure to satisfy a closing condition gives the other party a right to refuse to close the acquisition but does not make the failing party liable to the other party, unless such failure is the result of, or the cause of, a separate breach of the acquisition agreement. In addition, because of the period of time between signing and closing, events may occur that may result in a party’s desire to terminate the acquisition agreement prior to closing. Accordingly, the parties often negotiate provisions granting the right to terminate the acquisition agreement upon mutual agreement or upon the occurrence of certain specified events.

Committed Capital

Committed Capital is a pledge of capital (money) from investors who express their intent to invest in a private equity fund. Committed capital is not given to a fund all-in-one payment, but rather is required to be paid as needed, over a three to five year period (typically), starting in the year the fund is formed.

Confidential Information Memorandum

A Confidential Information Memorandum (or “CIM”) is a marketing document that is presented at the initial stages of the sale process to potential buyers. The goal of a CIM is to provide buyers with the information necessary to decide whether to submit a letter of intent. It typically includes a description of the sale process and outlines the type of transaction (stock or asset sale) being offered by the seller. While called a “confidential” information memorandum, nothing in the CIM is confidential unless a non-disclosure agreement (NDA) is signed prior to releasing the CIM. As such, sellers should take care and avoid disclosing highly sensitive information in the CIM if an NDA is not executed prior to issuing the CIM. As the CIM is an introductory document, there are other opportunities in the sale process for a seller to release additional sensitive or complex financial information.

Definitive Transaction Documents

Definitive Transaction Documents are the binding documents that govern a transaction. In contrast, a term sheet or letter of intent is a preliminary document which form the basis for drafting the Definitive Transaction Documents.

Disclosure Schedules

Disclosure Schedules are documents that disclose instances that deviate from the representations and warranties found in the Definitive Transaction Agreement.

Discount Rate

Discount Rate is the interest rate used to discount a stream of future cash flow to its present value. Depending upon the application, the discount rate is used to determine a company’s cost of capital or the current market rate. It is a mathematical formula that converts anticipated returns from an investment project to their current market value (present value). It is always less than 1, and depends on the cost of capital and the time interval between the investment date and the date when returns start to flow.


Due Diligence is an investigation of an asset or company to ensure what is being offered for sale is properly represented by a seller. Due diligence helps a buyer make sure that there are no unexpected problems with the asset, and to assist a buyer in its effort to determine value. Due diligence varies depending on what investment opportunity is being assessed. Generally speaking, due diligence can be broken down into these categories: financial/accounting; operational; IT; valuation; legal; and tax.

Due Diligence List

A Due Diligence List is a list of items that a buyer would like to review during the due diligence. Among the items that are typically sought by a buyer during due diligence may include, but are not limited to, the following: recent complete tax returns, recent complete financial statements (profit & loss statements, balance sheets, current interim financials, current inventory report, list of assets being sold with the business, current accounts receivable report, current accounts payable report, checkbook register), client list, list of employees, current and past payroll records, a current copy of all licenses used by the business, copies of lease or mortgage documents, lien reports, environmental reports, appraisals, vendor list, and copies of all contracts (equipment, advertising, suppliers, etc.).


An Earn-Out is a part of the purchase price that may or may not be paid to a seller, depending on the performance of the business after a sale of the business closes. Earn-outs are employed when a buyer and seller disagree about the expected growth and future performance of the target company. Earn-outs are also common as a way to keep the sellers involved and motivated following the acquisition.


EBITDA is the acronym for Earnings Before Interest, Tax, Depreciation, and Amortization. EBITDA measures a company’s operating performance and is a widely accepted way to evaluate a company’s performance without having to factor in financial decisions, accounting decisions or tax environments. EBITDA is calculated by adding back the non-cash expenses of depreciation and amortization to a firm’s operating income. EBITDA allows analysts to generate useful comparisons between companies, project long-term profitability, and the ability to pay off future financing. EBITDA also can be used to calculate the income available for interest payments to a company’s secured creditors.

Equity Crowdfunding vs. “Crowdfunding”

Crowdfunding, as it is generally used, refers to a large number of people gifting small amounts of money to a cause, company, project or person they believe in. Also known as “Rewards-Based Crowdfunding”, this type is open to anyone, regardless of income and doesn’t give the “investor” any type of ownership, return or equity in their investment. Equity Crowdfunding is only open to accredited investors and although the investment amount is lower than for other types of investments, it is still significantly higher than the average American could afford. In return, the investor receives equity and, if all goes well, a return on their investment. Equity Crowdfunding, although approved by the JOBS Act, has not yet been implemented because of pending SEC regulations.


ERISA is the acronym for the Employee Retirement Income Security Act of 1974 (Act). The Act sets forth minimum standards for pension plans in private industry and provide extensive rules on the income tax effects of transactions associated with employee benefit plans.


An Escrow refers to money held by a third-party on behalf of a buyer and seller, to be released to one or the other only upon appropriate instruction from the parties or fulfillment of a condition found in a contract.


Exemption is a security that is free from the legal obligation, liability or penalty being applied to other securities. For example, some securities are exempt from the requirement to register with the SEC. The Uniform Securities Act lists the types of securities that are exempt from registration requirements and the obligation to file advertising materials. However, even if a security is not required to be registered with the SEC, no security is exempt from the anti-fraud provisions of the law. Securities that are exempt are: Government Securities, Commercial Paper, Financial Institution Securities, Insurance Company Securities, Not-for-Profit Enterprise Securities, Public Utility and Common Carrier Securities, Securities Listed on Stock Exchanges and Options or Warrants.

Family Office

A Family Office is a private company that manages investments and trusts (as well as many day-to-day activities) for a single family, also known as a “Single Family Office.” Additional services include property management, accounting, payroll and legal affairs, philanthropic activity and estate planning. Costs for a family office typically run over $1 million to operate, so the family’s net worth usually exceeds $100 million.

FINRA (Financial Industry Regulatory Authority)

Authorized by Congress, FINRA is the largest independent securities regulator in the U.S., whose primary role is to protect investors by maintaining the fairness of the U.S. capital markets. This is done by writing and enforcing rules governing the activities of more than 4,190 securities firms with approximately 634,950 brokers; examining firms for compliance with those rules; fostering market transparency; and educating investors.

Financial Statements

Financial Statements are records about an organization’s financial activities and condition. The most common examples include the Balance Sheet, Income Statement, and Statement of Cash Flows.

Fixed Asset Base

Fixed Asset Base are those assets owned by a company that contribute to the company’s income but are not consumed in the income generating process and are not held for cash conversion purposes.

Free Cash Flow

Free Cash Flow is the amount of cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, reducing debt, or other purposes. The formula for free cash flow is:

FCF = Operating Cash Flow – Capital Expenditures

The data needed to calculate a seller’s free cash flow is usually on its cash flow statement. It is important to note that free cash flow relies heavily on the state of a seller’s cash from operations, which in turn is heavily influenced by the seller’s net income. Thus, when a seller has recorded a significant amount of gains or expenses that are not directly related to the seller’s normal core business (a one-time gain on the sale of an asset out of the ordinary course, for example), it may very well be appropriate to exclude it from the free cash flow calculation to get a better picture of the seller’s normal cash-generating ability.

Generally, free cash flow might be influenced or manipulated by lengthening the time taken to pay bills, shortening the time it takes to collect accounts receivables, or delaying the purchase of inventory.

General Partner

A General Partner (GP) is one of the members within a limited partnership who is responsible for the day-to-day operations of the fund. The general partners assume all liability for the fund’s debts.

Good Standing Certificate

A Good Standing Certificate proves that a corporation (or limited liability company) was properly incorporated (or formed) and authorized to transact business in a certain state and is current with the filing requirements and franchise taxes required by that state.

Hedge Fund

A Hedge Fund, at the most fundamental level, is a private investment pool for wealthy, financially sophisticated investors, historically organized as partnerships, with the general partner (or managing member of an LLC) – the hedge fund manager – managing the fund’s portfolio and making investment decisions. In concept, they are intended to hedge against risk, however, they are known for a “high risk, high reward” approach. Hedge fund managers typically seek a specific range of performance, regardless of market trends. They do this by using sophisticated strategies and techniques. Read more here.


A Holdback is a portion of purchase price that a seller does not receive at closing until certain conditions are met. Like an indemnification, a buyer may negotiate a holdback on purchase price as a form of insurance to protect the buyer from overpaying for the company.


An Indemnification is an agreement to compensate a party for loss or damage that may occur. A common form of indemnification is an insurance policy. In the M&A context, a seller may agree to indemnify a buyer for claims that a third party may bring against the buyer for events that happened before the buyer buys. Indemnification provisions tend to be heavily negotiated because whereas buyers commonly want complete protection from events that did not happen on their “watch,” sellers commonly want a “clean break.”

Independent Valuation Analyst

An Independent Valuation Analyst is an appraisal professional designated by the American Society of Appraisers (ASA) as certified to conduct business valuations. The analyst must have sufficient work experience in business valuation, submit a sample valuation report, satisfy the educational and ethics requirements, and pass four specific exams. Other organizations offer similar accreditation; for example, the National Association of Certified Valuators and Analysts (NACVA) offers the “Certified Valuation Analyst” (CVA) designation and the American Institute of CPAs (AICPA) offers the “ABV” (Accredited in Business Valuation) designation.

Initial Public Offering

An Initial Public Offering occurs when a private company decides to sell shares to public investors. Before an IPO, a company’s stock is not traded on a public stock exchange. These offerings are usually underwritten by an investment bank.

IPO Market

The IPO Market refers to the market of companies that are in line or ready to sell securities in their companies for the first time.

Intangible Property

Intangible Property is personal property that cannot actually be moved, touched or felt. Intangible property includes goodwill, patents, trademarks, copyrights, company social media profiles, customer lists, vendor lists, internet websites, and other web-based properties are considered intangible property.

Investment Advisor

An Investment Advisor is a financial intermediary who provides assistance and advice to investors about their financial assets and management of the same. Advisors will examine investment funds for their clients and monitor the progress of existing investments. In some cases, they pool their investors’ capital in funds of funds.

Investment Bank

An Investment Bank is a financial institution that acts as an intermediary and provides various financial services such as underwriting securities offerings, facilitating mergers and acquisitions, and trading securities for its own account. Investment bankers are a component of investment banks.

Investment Horizon

An Investment Horizon is the length of time it will take for an investment to produce a return. In alternative investing, the typical expectation is an average of three to five years. Until an investment produces a return, invested capital will be illiquid – tied up and unavailable to investors.


The Issuer is the company, group or entity that issues a security of debt or equity to investors.

JOBS ACT of 2012 (Jumpstart Our Business Startups)

The JOBS ACT of 2012 (Jumpstart Our Business Startups) was legislation signed into law in April 2012 that was intended to encourage funding of small businesses by lifting various securities bans and easing regulations. Titles II and III of the legislation are the two most discussed sections among investors, advisors and the crowdfunding and startup communities. Title II, which lifted the ban on general solicitation, passed on September 23, 2013. Title III is still pending. AIMkts covers the JOBS Act frequently from a variety of standpoints and implications. For more information, start here.

Leveraged buyout (LBO)

A Leveraged Buyout (LBO) is the acquisition of a company or business unit, typically in a mature industry, with a considerable amount of debt. The buyers who obtain controlling interest repay the debt and typically restructure the company, with the intent to make it healthy and resell it. For an expanded explanation of how leveraged buyouts work, view a definition from Princeton University here and watch this video by Khan Academy.

Limited Partner

A Limited Partner (LP) is an investor in a limited partnership. Limited partners can monitor the partnership’s progress and the advantage for these limited partners is that they are not personally liable for business debts, but in exchange, they cannot become involved in its day-to-day management if they are to retain limited liability.

Limited Partnership

A Limited Partnership is an organizational structure that entails a temporary, contractual arrangement between entities referred to as ‘limited’ and ‘general’ partners. The arrangement serves as a temporary business, for tax and legal purposes, and is governed by a partnership agreement. Read an expanded definition here.

Limited Partnership Agreement (LPA)

A Limited Partnership Agreement (LPA) is the written contract setting forth the terms and conditions that govern the relationship between the limited partners and the general partners in a particular fund. View a sample Limited Partnership Agreement.


Liquidity refers to how easily an asset or security can be bought or sold in the market for cash, without affecting the asset’s price. Liquid assets are those that can be easily bought or sold and some advisors consider it to be safer to invest in liquid assets because they can more easily be sold for cash, allowing the investor to get money back from the investment more quickly.

Merger Arbitrage

Merger Arbitrage is a trader strategy applied when the purchaser company announces it is buying the target company. Through the period until the closing of the purchase, the target company’s shares should rise to same price that the purchaser company offered. The strategy is to take positions to capture the spread and to reap the profits when the deal closes. The strategy can be frustrated by, for example, regulatory actions that delay or forestall closing, by a down-swing in demand for the target company’s goods or services, and also by a spike in the costs of target company’s inputs.

Money-Center Bank

A Money-Center Bank is a bank that is usually located in a major economic center like London, Hong Kong, Tokyo and New York. These banks do not borrow from nor lend to consumers, but rather work only with governments, large corporations and regular banks.

Non-Disclosure Agreement

A Non-Disclosure Agreement (or “NDA” or “Confidentiality Agreement”) is a contract by which one party agrees to keep in confidence information that is disclosed to it by another party. NDAs are commonly used in connection with the buying and selling of businesses because in order for a potential buyer to perform its Due Diligence it commonly needs access to confidential information and the seller needs to be protected against that information being used for purposes other than to evaluate the potential transaction.

Organizational Documents

Organization Documents are the documents which legally form an entity, such as a corporation or limited liability company. The organizational documents of a corporation typically include articles of incorporation and bylaws. Those of an LLC typically include articles of organization and an operating agreement.


A Portfolio is any collection of financial assets that is owned or held by an investor and/or that is managed by financial professionals or groups. Portfolios do not have to any defined type of investments and can be a mixture of public and private investments. Most investment portfolios are created on a case-by-case basis for the specific needs of the investor including time frame, investor objectives and the investor’s ability to tolerate risk over a period of time.

Private Equity

Private Equity refers to the business of raising funds from investors to purchase a control positions in established privately held companies, typically by borrowing a high percentage of the cash used for the purchase. A private equity fund is any private fund that is not a hedge fund, liquidity fund, real estate fund, securitized asset fund or venture capital fund and does not provide investors with redemption rights in the ordinary course. For more information, click here.

Private Equity Fund

A Private Equity Fund is any private fund that is not a hedge fund, liquidity fund, real estate fund, securitized asset fund or venture capital fund and does not provide investors with redemption rights in the ordinary course.

Private Placement

A Private Placement is a private sale of securities to an individual or group of accredited investors. A private placement is mostly used by seed, startup and early stage companies, as it doesn’t require the registration with the Securities and Exchange Commission. Securities sold in a private placement can be in any form, including equity, equity-linked and debt, and can be issued by any type of entity, including funds, private companies, and even public companies (usually in private equity-like transactions called PIPEs, an acronym for a private investment in public equity). To sell securities under a private placement, an issuer needs to prepare a PPM. A PPM is a formal document in which an issuer presents an offer to potential investors. A PPM typically includes a description of the investment opportunity, risk factors associated with investing, a summary of the issuer’s capital structure, a description of who will manage the investment opportunity, the terms of the offering, and various other disclosures.

Rate of Return

Rate of Return is the profit on an investment over a period of time, expressed as a percentage of the original investment. Profits may come in annually or at the end of an investment period, depending on the terms of the investment.

Return/Return on Investment (ROI)

The Return/Return on Investment (ROI) is, simply put, a ‘return’ is profit made on the sale of an investment of interest after all fees and other financial obligations are paid out.

Reverse-Breakup Fee

Reverse-Breakup Fee is a fee paid by the buyer if it breaches the acquisition agreement or is unable to consummate the transaction due to lack of financing and the seller terminates the agreement in accordance with its terms.

Rule 506(b)

“Section 4(a)(2) of the Securities Act exempts from registration “transactions by an issuer not involving any public offering.” Rule 506(b) is a rule under Regulation D of that provides conditions that an issuer may rely on to meet the requirements of the Section 4(a)(2) exemption,” according to the SEC.

Rule 506(c)

Rule 506(c) is a newly adopted rule under Regulation D of the Securities Act defining how an issuer will still be able to offer and sell an unlimited amount of securities, but now allowing for the use of general solicitation to do so (subject to the requirement that reasonable steps are taken to verify that all purchasers are accredited investors).

S Corporations

An S corporation is a corporation that elects to pass corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.

Secondaries/Secondary Market

Secondaries/Secondary Market can have two applications, depending on the context. The first is a reference to a Secondary Public Offering, which happens when a company holds an IPO and later decides to offer another set of stock for purchase. The second and more widely used reference, points to the selling of shares on the secondary market, which occurs when shareholders, like employees for example, decide to sell some of their stock to others.

Section 1031 Real Property Exchange

A Section 1031 Real Property Exchange allow a seller to postpone paying tax on the gain if the seller reinvests the proceeds of the sale in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under Section 1031 is tax-deferred, but it is not tax-free. The term refers to Internal Revenue Code Section 1031, which provides this exception to the realization of capital gains from the sale of real property.


Securities are documents that represents an interest or a right in something else. They are forms of ownership that enable you to own an underlying asset without taking possession and, thus, enable efficient trading (buying and selling). U.S. securities law defines a security as:

any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

Securities laws exist to attempt to help ensure that investors have an informed, accurate idea of the type of interest they are purchasing and its value.

Sign and Close

Sign and Close refers to a situation in which parties to a transaction sign Definitive Transaction Documents and then, immediately, perform the actions necessary to consummate the underlying transaction. This is in contrast to a transaction in which there is a lapse in time between the signing of Definitive Transaction Documents and the consummation of the underlying transaction (and in such situations, the failure of a “Closing Condition” may prevent the transaction from ever being consummated).

Silver Bullet

A Silver Bullet is a metaphor referring to a direct or immediate, effortless solution to a problem that cuts through complexities and is perceived to have extreme effectiveness. In the investment world, it refers to a get-rich-quick ploy to imply that an investment will bring in more money, faster, than other types of investments.


A Startup is any newly formed company that is the early phases of research and development, and will need funding from investors to keep growing and furthering efforts to improve or expand on their idea. The startups that attract investors may be considered to be high risk, because of an innovative idea or technology, for example, but they attract investors because of the potential for high returns on investments.

Strategic Plan

A Strategic Plan communicates a company’s goals and the steps required to achieve those goals. It is the result of strategic planning.

Tangible Assets

Tangible Assets are physically real items of equitable value such as machinery, buildings and land, business inventory, cars and homes. Intangible assets are those with no physical aspect like patents, trademarks and copyrights.

Title II

Title II is a measure of the JOBS Act that directs the SEC to promulgate rules eliminating the long-standing prohibitions on “general solicitation” and “general advertising” (which we refer to collectively as “general solicitation”) in certain private securities offerings.

Title III

A provision of the JOBS Act that establishes the crowdfunding exemptions and directs the SEC to promulgate rules to give effect to those exemptions.

Title Certificates

Title Certificates or “certificates of title” are documents issued by a governmental authority that serves as documentary evidence who the owner personal is.

Transaction Multiple

Transaction Multiple is a financial metric used in valuing a company. As accurately described by Wall Street Oasis, “[i]t is used as part of comparable analysis. The theory is that you look at a group of companies similar to the one you are valuing, see what kind of prices they have been bought and sold for, and apply a similar valuation method to the target company.”

Venture Capital

Venture Capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that for reasons of size, assets, and stage of development cannot seek capital from more traditional sources, such as public markets and banks. Venture capital investments are generally made as cash in exchange for shares and an active role in the invested company.

Venture Capital Fund

A Venture Capital Fund invests in the equity of entrepreneurial companies that for reasons of size, assets, and stage of development cannot seek capital from other sources, such as public markets and banks. Venture capital investments are generally made as cash in exchange for shares and an active role in the invested company.

Working Capital

Working Capital is the money available to a company to fund day-to-day operations and is a commonly used financial measurement of a company’s liquidity, efficiency, and overall health. It generally includes cash, inventory, accounts receivable, accounts payable, the portion of debt due within one year, and other short-term accounts.

Read more: When Should a Seller Sign a Letter of Intent? and Strategic vs. Financial Buyers: Distinctive Ways of Acquiring Businesses

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