Glossary of M&A Terms for Tech Journalists and Investors
Tech M&A comes with its own vocabulary — terms that get thrown around in deal announcements and press releases but rarely get explained. This glossary breaks down the terms you'll run into most often when reading about tech acquisitions, mergers, and deal-making, from The CODEW.
Bookmark this page — we'll keep it updated as new terms enter common use.
Deal Types
Acquihire An acquisition made primarily to gain a company's team rather than its product. The startup's product is often shut down or deprioritized shortly after the deal closes.
Asset Purchase A deal where the buyer acquires specific assets — patents, a codebase, a customer list — without taking on the entire company or its liabilities.
Full Acquisition The buyer purchases the entire target company, including its product, team, intellectual property, and customer base.
Merger Two companies combine into a single new or surviving entity, typically between similarly sized players rather than a large company absorbing a small one.
Reverse Merger A private company acquires a public one to become publicly traded without going through a traditional IPO.
Roll-Up A strategy where a company acquires multiple smaller competitors in the same space to consolidate market share.
Deal Structure
All-Cash Deal The buyer pays the full purchase price in cash at closing, with no equity involved.
All-Stock Deal Sellers receives equity in the acquiring company instead of cash. Common in large strategic mergers.
Cash-and-Stock Deal A blend of cash and acquirer equity — the most common structure in mid-to-large tech deals.
Earnout A portion of the purchase price that's contingent on the acquired company hitting specific milestones after the deal closes — revenue targets, product launches, or retention goals. Reduces risk for the buyer if the target underdelivers.
Escrow A portion of the deal proceeds held back for a set period to cover potential claims, misrepresentations, or breaches discovered after closing.
Vesting Acceleration When an acquisition triggers unvested employee equity to vest faster than the original schedule, sometimes fully ("single-trigger") or only if the employee is also let go post-acquisition ("double-trigger").
The Deal Process
Definitive Agreement The final, legally binding contract that governs the transaction — covers price, warranties, indemnification, and closing conditions.
Due Diligence The investigative phase where the buyer reviews the target's financials, legal standing, technology, and operations before finalizing the deal. Often the longest phase of an acquisition and where many deals fall apart.
Letter of Intent (LOI) A non-binding document outlining the proposed terms of a deal — price, structure, timeline — used as a negotiating framework before the definitive agreement is drafted.
NDA (Non-Disclosure Agreement) A confidentiality agreement signed before either party shares sensitive information during early deal discussions.
Representations and Warranties Statements made by the seller in the purchase agreement about the accuracy of financials, legal compliance, and other facts about the business — these become the basis for post-closing indemnification claims if untrue.
Term Sheet Similar to an LOI — a summary of proposed deal terms used to align both parties before detailed legal drafting begins.
Valuation
ARR (Annual Recurring Revenue) The predictable, recurring revenue a subscription business generates annually — the most common basis for valuing SaaS companies in acquisitions.
Comparable Transactions ("Comps") Recent M&A deals involving similar companies, used as a benchmark to estimate what a target company might be worth.
Enterprise Value (EV) The total value of a company including debt and excluding cash — often used instead of market cap when valuing an acquisition target.
Revenue Multiple A valuation shortcut expressing purchase price as a multiple of the target's revenue (e.g., "the company sold for 8x ARR"). Multiples vary significantly by growth rate, margins, and market conditions.
Strategic Premium An amount a buyer pays above standard financial valuation because of non-financial value — competitive removal, key talent, or unique IP.
Regulatory & Legal
Antitrust Review The process by which regulators (the FTC and DOJ in the U.S., the European Commission in the EU) evaluate whether a proposed acquisition would harm market competition.
Break-Up Fee A penalty a buyer or seller may owe if they walk away from an agreed deal without a valid reason, or if regulators block the transaction.
HSR Filing A required regulatory filing in the U.S. (under the Hart-Scott-Rodino Act) for deals above a certain size threshold, triggering an antitrust review period before the deal can close.
Indemnification A contractual obligation for the seller to compensate the buyer for losses arising from breaches of representations, warranties, or other deal terms after closing.
Post-Deal
Integration The process of merging the acquired company's product, team, and systems into the buyer's existing operations.
Product Sunset When the acquired company's original product is discontinued after the deal, common in acquihire-driven acquisitions.
Retention Package Bonuses, accelerated vesting, or other incentives offered to key employees of the acquired company to encourage them to stay for a defined period after closing.
Standalone Operation When an acquired company continues to operate independently under the buyer's ownership rather than being folded into existing teams or products.
Related Reading
- How Tech Acquisitions Work: A Complete Guide — the full process, step by step
- Tech M&A Database — track real deals as they happen
Know a term we're missing? Let us know and we'll add it.
No comments: