The form by which the purchase of the business is accomplished. It can include cash, notes, stock, consulting agreements, earn-out provisions, and covenants not to compete. The sale can take the form of an asset sale or a stock sale.
The amount the estimated value of a tangible assets decrease over its expected life cycle. For accounting purposes, this is designated the IRS.
The rate of return expected by the buyer of a company to compensate him or her for the risk associated with their investment.
The process whereby a buyer or seller reviews a business's financial, legal and operational performance. When conducted by a potential buyer, the objective is to satisfy the buyer that all representations were accurate. When conducted by a seller, it can be used to assure that representations being prepared for the buyer are accurate, or it can be used by the seller to satisfy that representations made by a potential buyer are accurate.
The final agreement between the buyer and seller that lays out all the terms of the transaction in detail.
A type of insurance that is paid when the insured is unable to work. For a business owner, Personal Disability Insurance should be considered to provide an income stream for their family and Disability Overhead Protection Insurance should be considered to replace cash flow loss due to the absence of the owner.
The valuation tool that looks at projected cash flows, and discounts them to present value. The discounting factor is in part determined by the Capital Asset Pricing Model.