Business Brokerage Services – Glossary
Acquisition – When a company, entity or individual purchases a majority interest in another company.
Asking Price – The total amount for which a business or an ownership interest is offered for sale. Asset Sale – This term has two definitions. The proper definition depends on its usage:
Asset Sale – This term has two definitions. The proper definition depends on its usage:
- The means by which a business owner transfers ownership of tangible and intangible assets to another owner without transferring the ownership structure.
- The sale of a business enterprise at a price based solely upon the value of the tangible assets.
Blue-Sky – That portion of a requested price that cannot be supported through the application of established valuation methodology and which generates no economic benefit.
Business Broker – A Business Broker is an intermediary dedicated to serving clients and customers who desire to sell or acquire businesses. A business broker is committed to providing professional services in a knowledgeable, ethical and timely fashion. Typically, a Business Broker provides information and business advice to sellers and buyers maintains communications between the parties and coordinates the negotiations and closing processes to complete desired transactions.
Business Intermediary – An agent who is a mergers and acquisitions specialist for a buyer/investor or seller who is expected to facilitate the transaction.
Client – An entity with whom a Business Broker has a fiduciary relationship.
Co-Brokerage – An agreement between two or more Business Brokers for sharing services, responsibility and compensation on behalf of a client. Co-Business Broker – A Business Broker who shares services, responsibility, and compensation on behalf of a client.
Co-Business Broker – A Business Broker who shares services, responsibility, and compensation on behalf of a client.
Cooperating Business Brokers – Business Brokers who share their knowledge, expertise, and skills for the benefit of the business brokerage profession, clients, customers and the public good.
Customer – An entity to a transaction who receive services and benefits, but has no fiduciary relationship with the Business Broker.
Discretionary Earnings – The earnings of a business enterprise prior to the following items:
- Income taxes
- Nonoperation income and expenses
- Nonrecurring income and expenses
- Depreciation and amortization
- Interest expense or income
- Owner’s total compensation for those services, which could be provided by a sole owner/manager.
Finders Fee – An amount paid to another party for locating and referring a client or customer.
Merger – The combining of two companies in which the stockholders of one company exchanges all of their stock for shares of another company. The company that receives the shares and issues their stock is the surviving company.
Mergers and Acquisitions (M&A) – A term that is commonly used for the mergers, acquisitions and the selling of companies. M&A is a commonly used abbreviation for this term.
Nonoperation\Non-contributing Asset – An asset unnecessary to the operation of a business enterprise and the generation of its revenues.
Owner – A generic term used in business brokerage to represent the proprietor, general partner or controlling shareholder (singular or plural as appropriate) of a business enterprise.
Owner’s Salary – The salary or wages paid to the owner, including related payroll burden.
Owner’s Total Compensation – Total of an owner’s salary and perquisites, after the compensation of all other owners has been adjusted to market value.
Perquisites – Expenses incurred at the discretion of the owner, which are unnecessary to the continued operation of the business.
Referring Business Broker – A Business Broker who provides introductory information, which leads to a client relationship.
Stock Sale – The purchase of a company’s shares of stock and in which the purchaser assumes all of the assets and all of the debt, both tangible and intangible.
Transaction Value – The total of all consideration passed at any time between the Buyer and Seller for an ownership interest in a business enterprise and may include, but not limited to, all remuneration for tangible and intangible assets such as furniture, equipment, supplies, inventory, working capital, noncompetition agreements, employment and/or consultation agreements, licenses, customer lists, franchise fees, assumed liabilities, stock options, stock or stock redemptions, real estate, leases, royalties, earn-outs and future considerations.
Source: Courtesy of IBBA