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Glossary of Terms

Set out below is a Glossary of standard transactional terminology for private equity and corporate finance transactions. Use the filter menu if you are looking for a specific term, or to navigate the Glossary alphabetically.

AcquisitionOne company taking over a controlling interest of another company.

DemergerA demerger is the opposite of an acquisition. A company spins off some business it owns into a completely separate company, usually carried out by distributing shares in the business to be spun off to shareholders of the company carrying out the demerger.

Due diligenceUsually undertaken by investors, due diligence refers to the process of making sure that someone or something is what they say they are and can do what they claim prior to an acquisition being completed. The individual elements of due diligence may include commercial (markets, product and customers), a market report, an accountants report (trading record, net assets and taxation position) and legal (implications of litigation, title to assets and intellectual property issues).

MergerA transaction which merges two companies into one, a share for share exchange. Often a merger is actually an acquisition. If the swap is not on equal terms then this is an acquisition.

Reverse takeoverA reverse takeover is where a larger unlisted company achieves a stock market listing by acquiring a smaller listed company. The acquisition is achieved by the listed company issuing new shares to acquire the unlisted company. As the unlisted company is larger than the listed one, the unlisted company has to issue so many new shares that the owners of the unlisted company end up with a controlling stake.