M&A and Post-Merger Integration Glossary
Complete Terms, Definitions, and Formulas
A
Accretion/Dilution Analysis
Definition: Analysis determining whether a transaction increases (accretive) or decreases (dilutive) the acquirer’s earnings per share (EPS). Formula:
Accretion % = [(Pro Forma EPS - Standalone EPS) / Standalone EPS] × 100
Acquisition Premium
Definition: The amount paid above the target’s current market value. Formula:
Premium % = [(Offer Price - Current Share Price) / Current Share Price] × 100
Adjusted EBITDA
Definition: Earnings before interest, taxes, depreciation, and amortization, adjusted for one-time items and non-recurring expenses. Formula:
Adjusted EBITDA = EBITDA + Non-recurring Expenses - Non-recurring Income
Annual Revenue Run Rate (ARR)
Definition: Projected annual revenue based on current period performance. Formula:
ARR = Current Period Revenue × (12 / Number of Months in Period)
Average Revenue Per User (ARPU)
Definition: Average revenue generated per customer or user. Formula:
ARPU = Total Revenue / Number of Users
B
Backward Integration
Definition: Acquisition of a supplier or movement upstream in the supply chain to control inputs.
Breakup Fee
Definition: Penalty paid if a party backs out of a merger agreement. Formula:
Breakup Fee = Typically 2-4% of Transaction Value
Bridge Loan
Definition: Short-term financing used until permanent financing is secured. Formula:
Bridge Loan Cost = Principal × (Interest Rate × Term) + Fees
Burn Rate
Definition: Rate at which a company uses cash to fund operations. Formula:
Monthly Burn Rate = (Starting Cash - Ending Cash) / Number of Months
C
Capital Efficiency Ratio
Definition: Measure of how effectively a company uses capital to generate revenue. Formula:
Capital Efficiency = Revenue / Total Capital Invested
Capacity Utilization Rate
Definition: Percentage of potential output actually being produced. Formula:
Capacity Utilization = (Actual Output / Maximum Possible Output) × 100
Cash Conversion Cycle (CCC)
Definition: Time it takes to convert investments in inventory into cash. Formula:
CCC = Days Inventory Outstanding + Days Sales Outstanding - Days Payable Outstanding
Change in Control Premium
Definition: Additional compensation paid when ownership control shifts. Formula:
Control Premium = (Price Paid for Control - Minority Share Price) / Minority Share Price × 100
Churn Rate
Definition: Rate at which customers stop doing business with a company. Formula:
Churn Rate = (Customers Lost in Period / Customers at Start of Period) × 100
Cost Per Acquisition (CPA)
Definition: Total cost to acquire a new customer. Formula:
CPA = Total Acquisition Costs / Number of New Customers Acquired
Cost Synergies
Definition: Cost reductions achieved through combining operations. Formula:
Cost Synergies = Pre-Merger Combined Costs - Post-Merger Combined Costs
Cross-Sell Rate
Definition: Percentage of customers purchasing additional products/services. Formula:
Cross-Sell Rate = (Customers with Multiple Products / Total Customers) × 100
Cultural Alignment Index
Definition: Measure of cultural compatibility between merging organizations. Formula:
CAI = (Aligned Cultural Dimensions / Total Cultural Dimensions Assessed) × 100
Customer Acquisition Cost (CAC)
Definition: Cost to acquire a new customer including all sales and marketing expenses. Formula:
CAC = (Sales Costs + Marketing Costs) / Number of New Customers
Customer Lifetime Value (CLV)
Definition: Total revenue expected from a customer over their entire relationship. Formula:
CLV = (Average Purchase Value × Purchase Frequency × Customer Lifespan) - Customer Acquisition Cost
Customer Retention Rate
Definition: Percentage of customers retained over a period. Formula:
Retention Rate = [(Customers at End - New Customers) / Customers at Start] × 100
D
Days Inventory Outstanding (DIO)
Definition: Average number of days inventory is held before sale. Formula:
DIO = (Average Inventory / Cost of Goods Sold) × 365
Days Payable Outstanding (DPO)
Definition: Average number of days to pay suppliers. Formula:
DPO = (Accounts Payable / Cost of Goods Sold) × 365
Days Sales Outstanding (DSO)
Definition: Average number of days to collect payment after a sale. Formula:
DSO = (Accounts Receivable / Total Credit Sales) × 365
Deal Multiple
Definition: Valuation multiple paid in a transaction. Formula:
EV/EBITDA Multiple = Enterprise Value / EBITDA
P/E Multiple = Purchase Price / Net Income
Debt Service Coverage Ratio (DSCR)
Definition: Cash flow available to pay debt obligations. Formula:
DSCR = Net Operating Income / Total Debt Service
Debt-to-EBITDA Ratio
Definition: Measure of leverage and ability to pay off debt. Formula:
Debt/EBITDA = Total Debt / EBITDA
E
Earnings Before Interest and Taxes (EBIT)
Definition: Company’s profit before interest and tax expenses. Formula:
EBIT = Revenue - COGS - Operating Expenses
EBITDA Margin
Definition: EBITDA as a percentage of revenue. Formula:
EBITDA Margin = (EBITDA / Revenue) × 100
EBITDA-to-Interest Coverage
Definition: Ability to pay interest expenses from earnings. Formula:
Interest Coverage = EBITDA / Interest Expense
Employee Net Promoter Score (eNPS)
Definition: Measure of employee satisfaction and loyalty. Formula:
eNPS = % Promoters - % Detractors
Employee Productivity
Definition: Output per employee. Formula:
Revenue per Employee = Total Revenue / Number of Employees
Profit per Employee = Net Profit / Number of Employees
Enterprise Value (EV)
Definition: Total value of a company including debt and equity. Formula:
EV = Market Cap + Total Debt - Cash and Cash Equivalents
F
First Call Resolution Rate
Definition: Percentage of customer issues resolved on first contact. Formula:
FCR = (Issues Resolved on First Call / Total Issues) × 100
First Pass Yield (FPY)
Definition: Percentage of products manufactured correctly without rework. Formula:
FPY = (Units Passing Quality / Total Units Produced) × 100
Fixed Charge Coverage Ratio
Definition: Ability to cover fixed charges from earnings. Formula:
FCCR = (EBIT + Fixed Charges) / (Fixed Charges + Interest)
Forward Integration
Definition: Acquisition of a customer or movement downstream in the supply chain.
Free Cash Flow (FCF)
Definition: Cash generated after accounting for capital expenditures. Formula:
FCF = Operating Cash Flow - Capital Expenditures
Free Cash Flow Yield
Definition: Free cash flow relative to market value. Formula:
FCF Yield = (Free Cash Flow / Market Capitalization) × 100
Functional Readiness Score
Definition: Measure of department preparedness for integration. Formula:
FRS = (Completed Preparation Tasks / Total Required Tasks) × 100
G
Gross Margin
Definition: Profitability after direct costs. Formula:
Gross Margin = [(Revenue - COGS) / Revenue] × 100
Gross Merchandise Value (GMV)
Definition: Total value of merchandise sold through a platform. Formula:
GMV = Sales Price × Number of Items Sold
Growth Rate
Definition: Rate of increase in a metric over time. Formula:
Growth Rate = [(Current Period - Previous Period) / Previous Period] × 100
H
Horizontal Integration
Definition: Acquisition of a competitor at the same level of the value chain.
Human Capital ROI
Definition: Return on investment in human resources. Formula:
HC ROI = (Revenue - (Operating Expenses - HR Investments)) / HR Investments
I
Integration Cost Ratio
Definition: Integration costs relative to deal value. Formula:
Integration Cost Ratio = (Total Integration Costs / Transaction Value) × 100
Internal Rate of Return (IRR)
Definition: Discount rate that makes NPV of cash flows equal to zero. Formula:
NPV = Σ [Cash Flow / (1 + IRR)^t] - Initial Investment = 0
Inventory Turnover
Definition: How many times inventory is sold and replaced. Formula:
Inventory Turnover = Cost of Goods Sold / Average Inventory
K
Key Performance Indicator (KPI)
Definition: Measurable value demonstrating effectiveness in achieving objectives.
Key Talent Retention Rate
Definition: Percentage of identified critical employees retained. Formula:
Key Talent Retention = (Key Employees Retained / Total Key Employees Identified) × 100
L
Leadership Pipeline Strength
Definition: Ratio of ready successors to key positions. Formula:
Pipeline Ratio = Number of Ready Successors / Number of Key Positions
Leverage Ratio
Definition: Amount of debt relative to equity or EBITDA. Formula:
Debt-to-Equity = Total Debt / Total Equity
Net Debt/EBITDA = (Total Debt - Cash) / EBITDA
Lifetime Value to CAC Ratio
Definition: Customer lifetime value relative to acquisition cost. Formula:
LTV/CAC = Customer Lifetime Value / Customer Acquisition Cost
M
Market Share
Definition: Company’s sales as a percentage of total market sales. Formula:
Market Share = (Company Revenue / Total Market Revenue) × 100
Message Consistency Score
Definition: Measure of unified communication across stakeholders. Formula:
MCS = (Consistent Messages Delivered / Total Messages) × 100
Monthly Recurring Revenue (MRR)
Definition: Predictable revenue received monthly. Formula:
MRR = Number of Customers × Average Revenue per Customer per Month
Multiple of Invested Capital (MOIC)
Definition: Total value relative to invested capital. Formula:
MOIC = Total Value Realized / Total Capital Invested
N
Net Asset Value (NAV)
Definition: Value of assets minus liabilities. Formula:
NAV = Total Assets - Total Liabilities
Net Operating Profit After Tax (NOPAT)
Definition: Operating profit after taxes. Formula:
NOPAT = EBIT × (1 - Tax Rate)
Net Present Value (NPV)
Definition: Present value of cash flows minus initial investment. Formula:
NPV = Σ [Cash Flow / (1 + Discount Rate)^t] - Initial Investment
Net Promoter Score (NPS)
Definition: Customer loyalty and satisfaction metric. Formula:
NPS = % Promoters (9-10 rating) - % Detractors (0-6 rating)
Net Working Capital
Definition: Difference between current assets and current liabilities. Formula:
NWC = Current Assets - Current Liabilities
New Customer Acquisition Rate
Definition: Rate of gaining new customers. Formula:
Acquisition Rate = (New Customers in Period / Total Potential Customers) × 100
O
Operating Cash Flow (OCF)
Definition: Cash generated from normal business operations. Formula:
OCF = Net Income + Depreciation + Changes in Working Capital
Operating Leverage
Definition: Degree to which fixed costs are used in operations. Formula:
Operating Leverage = % Change in EBIT / % Change in Sales
Operating Margin
Definition: Operating income as a percentage of revenue. Formula:
Operating Margin = (Operating Income / Revenue) × 100
Overall Equipment Effectiveness (OEE)
Definition: Measure of manufacturing productivity. Formula:
OEE = Availability × Performance × Quality
P
Payback Period
Definition: Time required to recover an investment. Formula:
Payback Period = Initial Investment / Annual Cash Flow
Post-Merger Integration (PMI)
Definition: Process of combining two companies after merger completion.
Price-to-Earnings Ratio (P/E)
Definition: Stock price relative to earnings per share. Formula:
P/E Ratio = Share Price / Earnings per Share
Pricing Power Realization
Definition: Ability to increase prices without losing customers. Formula:
Price Increase Realization = (Actual Price Increase / Target Price Increase) × 100
Procurement Savings Rate
Definition: Cost reduction from consolidated purchasing. Formula:
Procurement Savings = [(Old Cost - New Cost) / Old Cost] × 100
Productivity Improvement
Definition: Increase in output per unit of input. Formula:
Productivity Change = [(New Output/Input - Old Output/Input) / Old Output/Input] × 100
Q
Quick Ratio
Definition: Ability to meet short-term obligations with liquid assets. Formula:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Quick Wins Achievement Rate
Definition: Percentage of early integration successes completed. Formula:
Quick Wins Rate = (Completed Quick Wins / Planned Quick Wins) × 100
R
Recurring Revenue Ratio
Definition: Portion of revenue that is predictable and recurring. Formula:
Recurring Revenue % = (Recurring Revenue / Total Revenue) × 100
Return on Assets (ROA)
Definition: Profitability relative to total assets. Formula:
ROA = (Net Income / Total Assets) × 100
Return on Equity (ROE)
Definition: Return generated on shareholders’ equity. Formula:
ROE = (Net Income / Shareholders' Equity) × 100
Return on Investment (ROI)
Definition: Gain from investment relative to cost. Formula:
ROI = [(Gain from Investment - Cost) / Cost] × 100
Return on Invested Capital (ROIC)
Definition: Return generated on all invested capital. Formula:
ROIC = NOPAT / Invested Capital
Revenue Enhancement
Definition: Increase in revenue from synergies. Formula:
Revenue Enhancement = Post-Merger Revenue - Sum of Standalone Revenues
Revenue per Available Room (RevPAR)
Definition: Hospitality metric for room revenue efficiency. Formula:
RevPAR = Average Daily Rate × Occupancy Rate
Revenue Run Rate
Definition: Projected annual revenue based on current performance. Formula:
Revenue Run Rate = Current Month Revenue × 12
Or: Revenue Run Rate = Current Quarter Revenue × 4
Revenue Synergies
Definition: Additional revenue from combined operations. Formula:
Revenue Synergies = Combined Revenue - (Company A Revenue + Company B Revenue)
S
Sales Efficiency
Definition: Revenue generated per dollar of sales expense. Formula:
Sales Efficiency = Revenue / Sales & Marketing Expense
SG&A Ratio
Definition: Selling, general, and administrative expenses as percentage of revenue. Formula:
SG&A Ratio = (SG&A Expenses / Revenue) × 100
Synergy Realization Rate
Definition: Actual synergies achieved versus planned. Formula:
Synergy Realization = (Achieved Synergies / Planned Synergies) × 100
System Uptime
Definition: Percentage of time systems are operational. Formula:
Uptime % = [(Total Time - Downtime) / Total Time] × 100
T
Take Rate
Definition: Percentage of transaction value retained as revenue. Formula:
Take Rate = (Platform Revenue / Gross Merchandise Value) × 100
Terminal Value
Definition: Value of a business beyond the forecast period. Formula:
Terminal Value = FCF × (1 + Growth Rate) / (Discount Rate - Growth Rate)
Time to Value
Definition: Time required to realize benefits from an investment. Formula:
Time to Value = Date of First Value Realization - Date of Investment
Total Addressable Market (TAM)
Definition: Total market demand for a product or service. Formula:
TAM = Total Number of Customers × Average Revenue per Customer
Total Cost of Ownership (TCO)
Definition: Complete cost of acquiring and operating an asset. Formula:
TCO = Purchase Price + Operating Costs + Maintenance - Residual Value
Total Shareholder Return (TSR)
Definition: Total return to shareholders including dividends. Formula:
TSR = [(Ending Price - Beginning Price) + Dividends] / Beginning Price × 100
U
Unit Economics
Definition: Direct revenues and costs associated with a single unit. Formula:
Unit Profit = Revenue per Unit - Cost per Unit
Upsell Rate
Definition: Percentage of customers upgrading to higher-value products. Formula:
Upsell Rate = (Customers Who Upgraded / Total Customers) × 100
Utilization Rate
Definition: Percentage of available capacity being used. Formula:
Utilization Rate = (Actual Output / Maximum Capacity) × 100
V
Value at Risk (VaR)
Definition: Maximum potential loss over a specific time period. Formula:
VaR = Portfolio Value × Volatility × Z-Score
Value Creation
Definition: Increase in company value through strategic initiatives. Formula:
Value Created = Post-Deal Enterprise Value - Pre-Deal Combined Value - Integration Costs
Value Leakage
Definition: Loss of value during integration. Formula:
Value Leakage = Expected Value - Actual Value Realized
Vendor Consolidation Ratio
Definition: Reduction in number of suppliers. Formula:
Consolidation Ratio = (Pre-Merger Vendors - Post-Merger Vendors) / Pre-Merger Vendors × 100
Voluntary Turnover Rate
Definition: Rate at which employees voluntarily leave the organization. Formula:
Voluntary Turnover = (Voluntary Departures / Average Headcount) × 100
Annual Voluntary Turnover = (Annual Voluntary Departures / Average Annual Headcount) × 100
W
Weighted Average Cost of Capital (WACC)
Definition: Average cost of all capital sources weighted by their use. Formula:
WACC = (E/V × Re) + (D/V × Rd × (1 - Tax Rate))
Where: E = Equity, D = Debt, V = E + D, Re = Cost of Equity, Rd = Cost of Debt
Working Capital
Definition: Capital available for day-to-day operations. Formula:
Working Capital = Current Assets - Current Liabilities
Working Capital Efficiency
Definition: How efficiently working capital is used to generate revenue. Formula:
Working Capital Turnover = Revenue / Average Working Capital
Working Capital Days = (Working Capital / Revenue) × 365
Working Capital to Revenue Ratio
Definition: Working capital needed per dollar of revenue. Formula:
WC/Revenue = Working Capital / Annual Revenue
Y
Year-over-Year Growth (YoY)
Definition: Growth compared to the same period in the previous year. Formula:
YoY Growth = [(Current Year - Previous Year) / Previous Year] × 100
Yield
Definition: Return on an investment. Formula:
Dividend Yield = Annual Dividends / Share Price × 100
Bond Yield = Annual Interest / Bond Price × 100
Z
Zero-Based Budgeting (ZBB)
Definition: Budgeting method starting from zero rather than prior period. Formula:
ZBB Budget = Sum of All Justified Expenses (no historical baseline)
Z-Score (Altman)
Definition: Predictor of bankruptcy probability. Formula:
Z-Score = 1.2(Working Capital/Total Assets) + 1.4(Retained Earnings/Total Assets)
+ 3.3(EBIT/Total Assets) + 0.6(Market Value of Equity/Total Liabilities)
+ 1.0(Sales/Total Assets)
Special Integration Metrics
100-Day Milestone Completion Rate
Formula:
Completion Rate = (Milestones Achieved by Day 100 / Total Planned Milestones) × 100
Change Readiness Index
Formula:
CRI = (0.3 × Leadership Alignment) + (0.3 × Employee Engagement) + (0.2 × Communication Effectiveness) + (0.2 × Resource Availability)
Cultural Integration Success Rate
Formula:
CISR = (Successful Cultural Initiatives / Total Cultural Initiatives) × 100
Deal Value Creation Multiple
Formula:
Value Multiple = (Exit Value + Dividends) / Initial Investment
Integration Complexity Score
Formula:
ICS = (Geographic Complexity × 0.2) + (System Complexity × 0.3) + (Cultural Difference × 0.3) + (Regulatory Complexity × 0.2)
Integration Speed Index
Formula:
ISI = (Planned Integration Timeline / Actual Integration Timeline) × 100
Post-Merger Performance Index
Formula:
PMPI = (0.4 × Financial Performance) + (0.3 × Customer Metrics) + (0.3 × Employee Metrics)
Synergy Achievement Timeline
Formula:
SAT = Actual Time to Achieve 80% Synergies / Planned Time
Transformation Readiness Score
Formula:
TRS = (Strategic Clarity + Operational Capability + Cultural Readiness + Resource Availability) / 4
Note: All formulas should be adjusted for company-specific contexts and industry standards. Some metrics may require normalization or seasonal adjustments for accurate comparison.