M&A Vocabulary & Dynamics — the meeting cheat sheet

Built 2026-07-17 for Ryan: every term, number, and room-dynamic for Main Street deal work. Read the 60-second warmup before any meeting; the rest is the study layer. Companion to [[deal-desk-playbook]] and [[sellside-process-giannamore]]. Quiz me on this — reps make it native.

1. The money words (valuation)

Term	One line
SDE (Seller's Discretionary Earnings)	The currency under ~$5M: net profit + owner's salary/perks/one-times added back. "What one owner-operator actually takes home."
EBITDA	Earnings before interest, tax, depreciation, amortization. Used above ~$700K–1M earnings. EBITDA = SDE − a market-rate manager's salary. Confusing them = overpaying ~30%.
Add-backs	Expenses the seller claims weren't "real" (their salary, truck, travel, one-time legal). The battlefield. Every deal fight is here.
Normalized / recast financials	The P&L after add-backs are applied. Always rebuild it yourself — never accept the broker's recast.
Multiple	Price ÷ earnings. Main Street service: 2.5–3.5x SDE. What moves it: owner-independence, recurring revenue, growth, size, clean books.
Enterprise value (EV)	The whole-business price, debt-free cash-free. Distinguish from what the seller pockets.
TTM	Trailing twelve months. The freshest full-year picture; ask for it, not just last calendar year.
Run-rate	Current pace annualized. Sellers love it when they're growing; discount it — it's a projection wearing a suit.
Working capital	Cash + A/R + inventory − payables needed to run daily. Fight: does the deal include a "normal" level of it, or does the seller strip cash out?
Quality of Earnings (QoE)	The paid third-party check that the earnings are real. Post-LOI, on bigger deals.
Comps	What similar businesses actually sold for. CT trades comp: ~2.8–3.4x CF (Synergy sold data).
Proof of cash	Reconciling claimed revenue against 12 months of actual bank deposits. Tax returns are the truth; the P&L is the story.

2. Deal structure (where the money really moves)

Term	One line
Asset sale vs. stock sale	Asset = you buy the stuff, leave their entity and its liabilities behind (Main Street default). Stock = you buy the company itself, liabilities included. Always ask which — it changes tax and risk for both sides.
Cash at close	What the seller gets day one. Main Street: often only 10–50%.
Seller note	Seller finances part of the price (5–7 yrs, 6–9% typical; present in 60–90% of small deals). It's also a trust signal — a seller who won't carry paper doesn't believe their own numbers.
Earnout	Extra payment if the business hits targets. Tie to REVENUE, never profit — profit is manipulable by the buyer.
Right of offset	If the seller lied, you deduct damages from the note instead of suing. Non-negotiable.
Holdback / escrow	Money parked at close against surprises.
Seller financing / owner financing	Same as seller note, listing-speak. In a listing = structure-friendly seller.
SBA 7(a)	Gov't-backed acquisition loan: ~10% down, 10 yrs. "SBA pre-qualified" listing = a lender already believes the numbers (weak proof, but proof).
DSCR	Debt-service coverage ratio: earnings ÷ debt payments. Your floor: 1.25x after the note AND your salary. Never buy what cash flow can't carry.
Personal guarantee (PG)	You personally on the hook for the loan. SBA requires it. Know it before you sign it.
Consulting agreement	Paying the seller to stick around post-close — also a price-bridging tool with tax advantages.
Non-compete	Seller can't open across the street. Years + miles. Always.
Equity rollover	Seller keeps a slice — aligns them with your success, shrinks your check.
Balloon / amortization	How the note pays down; balloon = big lump at the end. Model it in the DSCR.
Installment sale	Tax treatment letting the seller spread gains across note years — a reason a seller takes your note. Know it as a selling point.

3. Process words (the sell-side machine)

Term	One line
Teaser / blind profile	1–2 anonymous pages: numbers and story, no name. First touch of the universe.
NDA / CA	Signed before identity or data. Ironclad; protects staff and clients from poaching.
CIM ("the book")	Confidential Information Memorandum — full operations/financials/management story, post-NDA only.
Process letter	The rules of the auction: what to submit, to whom, by when. Negotiate process before price.
IOI	Indication of Interest — non-binding price range, submitted by a hard common deadline. Sorts tourists from buyers.
LOI	Letter of Intent — the handshake in writing: price, structure, timeline, exclusivity. Non-binding except the parts that aren't (exclusivity, confidentiality). Speed at LOI is a weapon.
Exclusivity / no-shop	Post-LOI: seller stops talking to other buyers. As sell-side advisor, grant it late and short; as buyer, get it early and long.
Data room	The organized folder of everything (financials, contracts, leases). You'll build these — an AI-speed advantage.
Due diligence	Desk diligence pre-LOI (free, fast); confirmatory diligence post-LOI (30–60 days, paid experts).
APA / SPA	Asset (or Stock) Purchase Agreement — the real contract. $5–15K of legal = the best insurance in the deal.
Reps & warranties	The seller's sworn statements of fact in the APA. What you sue on (or offset against) when a lie surfaces.
Disclosure schedules	The APA's appendix where the seller lists every exception ("except the lawsuit in section 3.7..."). Read them harder than the contract.
Retrading	Cutting your price after LOI without new facts. Buyers who do it get blacklisted by brokers; when YOU find real dirt in diligence, that's not retrading — bring the evidence.
Transition / training period	Seller's weeks-to-months of handover, in writing, in the APA.

3.5 The paper trail — every document, in firing order

Engagement letter — your mandate + fee terms, signed before anything else. No paper, no work.
NDA / CA — every buyer signs before learning the name.
Teaser (blind profile) — the anonymous 1–2 pager that starts the hunt.
CIM — the full book, post-NDA only.
Process letter — the auction rules + one common IOI deadline.
IOIs — non-binding ranges arrive; the field gets cut.
Management meetings — finalists meet the owner.
LOI — price, structure, timeline, exclusivity. The handshake in writing.
Due diligence — data room opens; QoE if the deal size warrants.
APA / SPA + disclosure schedules — the real contract and its confession appendix.
Ancillary docs — seller note, non-compete, consulting agreement, lease assignment, bill of sale.
Closing statement — who wires what, to whom, at what hour.
Post-close — escrow releases, earnout tracking, transition per the APA.

Sell-side you shepherd all thirteen; buy-side you start at 2 and push for 8 fast.

4. Who's who (buyer & market taxonomy)

Term	One line
Strategic buyer	A company (competitor or adjacent) buying for synergies — often pays the premium.
Financial buyer	Buying for returns: PE, search funds, individuals. Disciplined on price.
Search fund / searcher	An individual (often MBA) with committed backers hunting ONE business to buy and run. Hungry, real, slow-ish. Your finder's-fee clients.
Independent sponsor	Dealmaker who finds the deal first, raises money per-deal after. Faster, scrappier.
Micro-PE	Small funds buying sub-$5M businesses outright.
Platform vs. add-on (tuck-in/bolt-on)	Platform = the first big buy PE builds on (premium multiple); add-on = small buy glued onto a platform (they can pay MORE than the math says because their platform trades at a higher multiple — know which one your deal is to them).
Roll-up	Buying many small same-industry shops to sell the combined thing at a bigger multiple. Why PE is in HVAC/plumbing/pest right now.
Multiple arbitrage	The roll-up math: buy at 3x, sell the aggregate at 6x. Also YOUR thesis: buy at 2.5x SDE, systematize, exit at 4x.
Holdco	Permanent-hold parent owning several operating businesses. Your Stage 5.
Family office	A wealthy family's private investment arm. Patient money, quiet.
Main Street vs. lower middle market (LMM)	Main Street: <$1–2M EV, SDE-priced. LMM: ~$2–50M, EBITDA-priced, real processes. You work the seam.

5. Red-flag vocabulary (diligence radar)

Term	One line
Customer concentration	Any client >20–25% of revenue = the whole deal reprices. First question on every B2B deal.
Key-man / owner dependence	THE question: what survives the owner leaving? If relationships live in their head, it's a job, not an asset.
Recurring vs. reoccurring	Contracted/subscription revenue vs. "they usually come back." Sellers blur it; multiples don't.
Churn / retention	How fast customers leave. Ask for the number; watch them not have it.
Deferred capex / maintenance	Worn trucks and old boilers = a hidden second purchase price.
A/R aging	Unpaid invoices by age. 90+ days = revenue that may be fiction.
WIP / backlog	Signed-but-unfinished work. In trades: is backlog profit coming, or underpriced jobs you inherit?
Cash business	Unreported revenue they want paid for. Never pay for what can't be proven.
Lease trap	Business dies if the landlord says no. Assignment terms before LOI.
Uncontracted key employee	The master tech with no agreement who IS the business.
Sale pending / sold comp	Listing-world noise — pendings fall through (a follow list, not a dead list).

6. The dynamics (how the room actually works)

Leverage = options, real or perceived. One buyer, no leverage. The seller's leverage is a process; the buyer's leverage is willingness to walk. Whoever needs the deal least, wins the terms.
Information asymmetry is the game. Sell-side: control the flow, stage the reveals, never let bidders see each other's cards. Buy-side: every fact you verify independently is leverage they don't know you have.
Anchoring: first credible number frames everything after. Anchor with SHOWN arithmetic (rebuilt SDE × comps), not attitude. Then silence — the first one to talk after a number usually loses ground.
Emotion is the most expensive item at the table. Desperation reprices a deal instantly, both directions. Detachment is a sellable service: the owner can't hide theirs — you can.
The broker's incentive: paid on CLOSE, not on price. They want DONE more than they want MAX. Useful to a serious buyer (they'll push your clean offer); a caution for sellers (that's your mandate pitch).
Price is the headline; terms are the money. $1.2M all-cash ≠ $1.4M with $400K down and a soft earnout. Concede the headline, take the terms — the seller tells the town the headline; you keep the economics.
Sellers' real currencies: legacy, employees kept, the name preserved, a dignified exit story. Free for you, priceless to them. Pay lavishly there.
Time kills deals — momentum is a real asset; slow responses read as weak interest (or weak competence). But rushed DILIGENCE kills buyers. Fast process, unhurried verification.
The FOMO engine (sell-side): bidders knowing a real multi-party process exists — without knowing who or how much — is what moves enterprise value.
Expectation management: a mandate launched at a fantasy price stalls in public and stains the business. Set the band before signing the seller.
Retrading destroys reputations in a small-broker world — and your reputation IS the deal-flow channel. Reprice only with evidence in hand.

7. Lines that signal fluency (deploy naturally, never all at once)

"Is this being run as an asset sale? And what's staying in — vehicles, A/R, working capital?"
"What does SDE look like after we normalize the add-backs? I'd like to rebuild it from the returns."
"What survives the owner leaving? Walk me through who holds the customer relationships."
"What's the customer concentration — anyone over 20%?"
"I underwrite to a 1.25 coverage ratio after debt service and a manager's salary — that's the box the structure has to fit."
"I'd want the earnout tied to revenue, not profit — cleaner for both sides."
"Is the seller open to carrying paper? The note terms matter more to me than the headline."
"Send the TTM and the last three years of returns — the P&L can come too, but returns first."
"Before we talk numbers, let's agree the process — who's in, what's shared, and the timeline."

8. The don'ts (fluency is also what you never do)

Don't say "profit" loosely — say SDE or EBITDA, and know which you mean.
Don't accept the listing's cash-flow number as anything but a claim.
Don't talk price before process (sell-side) or before rebuilt SDE (buy-side).
Don't fill silences after numbers.
Don't show the hunger. You have BlackRain income; you need nothing. Sound like it.
Don't bluff specifics you can't back — "I'll check and get back to you today" outranks a wrong answer. (Fluency includes knowing where your edge of knowledge is.)

The 60-second pre-meeting warmup

SDE = what one owner takes home; EBITDA = SDE minus a manager. 2.5–3.5x.
The battlefield is add-backs. Rebuild, never accept.
One question above all: what survives the owner leaving?
Concentration >20% reprices everything.
Concede headline price, take structure. Note, revenue-earnout, offset.
DSCR 1.25 after note + salary, or walk.
Asset sale, not stock. Returns, not P&L.
Anchor with shown math, then silence.
Their currencies: legacy, staff, name. Free. Pay big.
You need nothing. Sound like it.