Resources
The exit glossary.
The words you will hear the day a buyer takes an interest in your company, explained simply.
- ARR (annual recurring revenue)
- Recurring revenue over a year: MRR multiplied by twelve.
- Change-of-control clause
- A clause that lets a counterparty (customer, supplier, landlord) terminate or renegotiate the contract if the controlling shareholder changes, which is exactly what happens in a sale.
- Churn
- The share of customers, or of revenue, lost over a period. Buyers look at it closely: it tells them how long your customers stay.
- Copyright assignment
- A contract by which a creator transfers their rights in what they created to the company. For an external contractor it must be in writing: without it, they keep the rights to the code they developed.
- Customer concentration
- The weight of your largest customers in your revenue. The higher it is, the more losing a single customer weighs on the company.
- Data room
- The organised set of documents made available to a buyer during their checks: legal, finance, commercial, technology, people, tax.
- Deferred revenue
- The part of a subscription already collected that relates to a future period. In the accounts, it should not yet appear in revenue.
- Due diligence
- The checks a buyer carries out, often with their advisers, before committing for good.
- Earn-out
- Part of the price paid after the sale, if targets agreed in advance are met.
- EBITDA
- Earnings before interest, tax, depreciation and amortisation: what the business generates, regardless of how it is financed.
- Enterprise value and equity value
- Enterprise value measures the business, excluding cash and financial debt. The price of the shares follows by adding cash and subtracting debt.
- FEC (accounting entries file)
- The legally formatted French file that contains every accounting entry for a financial year. Every French accounting package can export it, and your accountant can send it to you.
- Intuitu personae
- Said of a contract entered into because of who a specific person is: it can be called into question if that person leaves.
- Letter of intent
- A document in which the buyer sets out their interest and the main terms of their offer. It usually does not commit them on price, but often does on exclusivity and confidentiality.
- Market-rate owner pay
- What it would cost to replace the owner in their role. An owner who is paid little or nothing makes profit look better than it is; buyers take this into account.
- MRR (monthly recurring revenue)
- The sum of active subscriptions, expressed per month: an annual subscription counts for one twelfth.
- Warranties and indemnities
- The seller’s undertaking to compensate the buyer if a debt or risk dating from before the sale comes to light afterwards, or if an asset turns out to be overvalued.