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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.

Share for share exchangeShare for share exchange is commonly used in group re-organisations, for example, to create a new holding company. It is when the shareholders in company A sell their shares to company B in return for an issue to them of shares in company B. This results in company B becoming the sole shareholder in company A.

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.

P/E ratioThe P/E ratio is one of the most commonly used ways of measuring a share's value compared to its peers and is calculated by dividing a company's share price by its earnings per share. Investors tend to compare the P/E ratios of companies in the same sector or the same index. A high P/E ratio generally indicates that a company is fast growing, but can also indicate that it is a higher risk investment. A low P/E ratio often indicates that a company is more mature.

Equity financingFinancing business operations by selling share capital in the company as opposed to taking on debt. The shareholders may be entitled to dividends. This is higher risk than lending and consequently the returns are usually greater.

A float/going PublicA UK float/quote/flotation/quotation is when a company offers their shares to be publically bought and sold on an exchange such as the London Stock Exchange (LSE), the Alternative Investment Market (AIM) or Plus Markets.

IPOBeing an initial public offer. Shares in the company are placed on a stock exchange.