Sit across the table from an experienced acquirer and you quickly notice something: they have a word for everything, and every word quietly favours their side. “We’ll need a small holdback.” “Standard working-capital peg.” “It’s a cash-free, debt-free number.” None of it sounds like much. All of it moves money — usually away from you. The vocabulary of M&A is not neutral; it was built by the people who buy companies for a living, and it works best on a founder who is hearing it for the first time.
This glossary levels that field. Thirty terms you will meet in a business sale, explained in plain English and from the seller’s chair — with the UAE-specific twists (the trade licence, the visas, the end-of-service gratuity) that most M&A dictionaries, written for American buyers, leave out. Keep it open during your first buyer conversations. The goal is simple: when a term is used on you, you should know whether to nod or to push back.
The documents and the process
NDA (Non-Disclosure Agreement). The first document in any sale — a mutual confidentiality undertaking before you hand over anything sensitive. It is also the first read on how a buyer behaves: a counterparty that fights an even-handed NDA tells you who they will be at the SPA.
Teaser and Information Memorandum (IM / CIM). The teaser is a one-page, anonymous summary used to gauge interest. The Information Memorandum (sometimes Confidential IM) is the full sale document — the business, the numbers, the growth case — built to open a competitive process, not to volunteer weaknesses.
Indication of Interest (IOI). A non-binding letter setting out a price range and rationale before a buyer has seen everything. It lets you compare appetite across buyers without anyone committing.
Letter of Intent (LOI) / Term Sheet. The non-binding outline of price and structure — and the one clause inside it that does bind: exclusivity. This is the most underestimated document in the process, because the structural skeleton of the entire deal is set here, while you still have alternatives. Read M&A deal structure before you sign one.
Exclusivity / No-shop. The period — often 45 to 90 days — during which you agree to negotiate with a single buyer and run no other process. Your leverage falls the moment you sign it, so keep it as short as you can and grant it only once a buyer has earned it.
Sale and Purchase Agreement (SPA). The binding contract that actually transfers the business: the price mechanism, the warranties, the indemnities, the conditions. Anything left vague at LOI stage is negotiated here in detail — and detail favours whoever prepared.
Disclosure Letter. The seller’s formal schedule of exceptions to the warranties. What you properly disclose here, a buyer generally cannot later claim as a breach — which makes it a shield, not an administrative afterthought.
Conditions Precedent (CPs). The boxes that must be ticked between signing and completion — regulatory approvals, third-party consents, licence steps. In the UAE, ownership-transfer and licensing mechanics frequently live here.
Completion / Closing. The day legal ownership and the money change hands. Signing and completion can fall on the same day or weeks apart, depending on the conditions precedent.
The price and how it is actually paid
Enterprise Value (EV). The value of the operating business, independent of how it is financed — and the figure almost every headline offer quotes. It is not what reaches your account. Ground your own EV as a range before any buyer does it for you.
Equity Value. What shareholders actually receive: enterprise value minus net debt, adjusted for working capital. This is the number that matters, and the one buyers mention last.
Cash-free, debt-free (CFDF). The standard basis for an offer: you keep the surplus cash, you clear the debt, the buyer takes a business carrying neither. It is where the bridge from headline EV to your cheque begins.
Net Debt. Debt minus cash, subtracted from enterprise value. Buyers routinely argue that more items are “debt” than your balance sheet shows — deferred revenue, overdue payables, accrued bonuses — and in the UAE, unfunded end-of-service gratuity is commonly treated as debt-like. Every dirham accepted into this bucket comes straight off your price.
Working-Capital Peg. The “normal” level of working capital you must leave in the business at completion; the price then adjusts for any shortfall or excess. Where that benchmark is set is a negotiation, not a calculation, and it can move real money.
Earnout. Part of the price deferred and made contingent on the business hitting future targets — revenue, EBITDA, retention — usually over one to three years. It bridges a valuation gap, and it transfers risk to the seller, who no longer controls the levers that decide whether the targets are met.
Deferred Consideration / Vendor Note. Price paid later, sometimes structured as a loan you extend to the buyer. Name it for what it is: you have become your buyer’s bank, holding an illiquid claim on a company you no longer control. Underwrite the covenant accordingly.
Equity Rollover. Reinvesting part of your proceeds into the buyer’s structure, keeping a minority stake for a “second bite” at a future exit. The upside is real; so is the fine print. Settle the minority protections — information rights, tag-along, drag-along, valuation — before you agree to it.
Locked-Box vs Completion Accounts. Two ways to finalise the price. A locked-box fixes it at signing off a recent, trusted balance sheet — certainty, and no second negotiation. Completion accounts leave the price provisional and true it up 60 to 90 days after closing — more flexible for the buyer, and classic dispute territory. Sellers with clean books usually prefer the locked-box.
Protecting the price: who carries the risk
Representations & Warranties. Your contractual statements of fact about the business — that the accounts are accurate, the contracts are valid, there is no hidden litigation. If a warranty is untrue and the buyer suffers a loss, you pay. This is the core of a seller’s post-sale risk.
Indemnity. A pound-for-pound promise to cover a specific, identified risk — a known tax exposure, a live dispute — sitting outside the general warranty regime. Buyers reach for indemnities when diligence surfaces something concrete.
Escrow / Holdback. Part of the price — commonly 10 to 20 percent — parked with a third party for 12 to 18 months to secure your warranties. It is legitimate and expected; refusing any escrow signals inexperience. The negotiation is proportion: size, duration, and staged release rather than one distant cliff.
Basket / Threshold. A minimum claim size before warranty claims become payable, so the escrow is not nibbled away by trivial issues. Your protection against death by a thousand small claims.
Cap. The ceiling on your total warranty liability, often expressed as a percentage of the price. Without a cap, you can in principle be liable for more than you were paid — never sign without one.
W&I Insurance (Warranty & Indemnity). A policy that absorbs warranty breaches in place of the seller, common in larger international deals. In GCC SME transactions, assume a real escrow and negotiate it well rather than counting on insurance.
Diligence and the number underneath
Due Diligence (DD). The buyer’s forensic examination of everything — financial, legal, tax, commercial, operational. This is the phase where deals are re-priced or quietly die; see the full diligence request list a buyer will work through.
Quality of Earnings (QoE). An independent test of how real and repeatable your earnings are, walking reported EBITDA to a defensible run-rate number. It matters because the multiple applies to the figure that survives the QoE, not the one you present. Closing that gap before going to market is the heart of commercial and financial due diligence on the buyer’s side.
Data Room. The secure repository holding every document a buyer needs to verify the business. A clean, complete data room is one of the cheapest ways to protect your price — preparing it is half the work in getting a business ready for sale.
Adjusted / Normalised EBITDA. Reported earnings stripped of one-off and owner-specific costs to show what the business would earn for a new owner. Most founder-led SME valuations are built on this number, not the statutory one.
Add-back. A specific cost added back to EBITDA — excess owner salary, personal expenses run through the business, a genuine one-off. Only the add-backs you can evidence line by line survive a buyer’s review; the rest get struck.
People, the UAE specifics, and life after the deal
Visa Sponsorship Transfer. In the UAE, employees are sponsored by the entity. In an asset deal they do not move automatically — each must transfer to the buyer’s sponsorship, person by person, which takes time and gives every key employee a moment to reconsider.
End-of-Service Gratuity (EOSG). The statutory terminal benefit owed to UAE employees. It is usually unfunded and usually treated as a debt-like item in the price bridge — so it quietly reduces your proceeds even though no bank is owed anything.
Non-compete / Non-solicit. Your post-sale promise not to compete with the business or poach its people and customers. Expect to give one; negotiate its length, geography and scope so it protects the buyer without trapping your next chapter.
Transition Services / Handover. The period you stay on after completion to hand over relationships and knowledge — paid, or built into the price. Define its length and your role in the SPA, not in a conversation after closing when your leverage is gone.
From vocabulary to leverage
Knowing the words is the floor, not the ceiling. The reason these terms matter is that each one is a small negotiation, and they compound: a generous escrow, a soft working-capital peg, a half-earnout and a debt-like EOSG can turn a strong headline into a disappointing cheque without a single hostile act. The defence is preparation — a clean data room and a defensible number shrink the warranties, the escrow, and the room a buyer has to re-trade.
If a sale is on your horizon, start by grounding your number: run the valuation calculator to see your enterprise-value range and the bridge down to equity, then test where your business stands against the dimensions a buyer’s diligence will probe with the exit readiness scorecard. Our exit and divestiture advisory runs the sell-side process end to end, and for a direct read on your situation you can book a strategy session. The buyers you will face are fluent in all of this. From here, so are you.
Frequently asked questions
What is the difference between enterprise value and equity value?
Enterprise value is the value of the operating business itself, independent of how it is financed — and it is what almost every headline M&A offer quotes. Equity value is what shareholders actually receive: enterprise value minus net debt, then adjusted for working capital. The gap between the two is where founders are most often surprised, because the number a buyer leads with is the enterprise value, not the cheque.
What does cash-free, debt-free mean in a business sale?
It is the standard basis for an M&A offer: the buyer acquires the business carrying neither surplus cash nor debt. You keep the cash on the balance sheet at completion and you clear the company's debt out of the proceeds, and the buyer takes a 'clean' operating business. It is the starting point for the bridge from the headline enterprise value down to what actually reaches your account.
What is an escrow in an M&A deal, and how much is normal?
An escrow (or holdback) is a portion of the price — commonly 10–20% — parked with a neutral third party for 12–18 months to secure your warranties. If a warranty proves false and the buyer suffers a loss, the claim is paid from the escrow before it touches your pocket. Escrow itself is legitimate and expected; the negotiation is about its size, its duration, and whether it releases in stages rather than at a single distant cliff.