Business Exit Terms in Australia
1. Accelerated Exit
A fast-tracked exit process used when a business faces urgent financial or operational pressures, requiring a quicker-than-normal sale process.
2. Administration
A legal process in Australia used to restructure an insolvent business, where an external administrator takes control to attempt to save the business or maximise returns to creditors.
3. Amalgamation
The merging of two or more companies into one entity. In Australia, this often involves the pooling of assets and liabilities.
4. Asset Sale
A transaction where the buyer purchases specific assets of a business rather than shares. This is common in smaller Australian businesses or when buyers do not want to assume liabilities.
5. Assignment of Contracts
The transfer of contractual rights and obligations from the seller to the buyer as part of a business exit. Often seen in asset sales in Australia.
6. Australian Competition and Consumer Commission (ACCC)
A regulatory body that oversees competition law in Australia, ensuring that business sales and mergers do not create anti-competitive markets.
7. Australian Securities and Investments Commission (ASIC)
Australia's corporate, markets, and financial services regulator, overseeing company laws, insolvency, and business exits.
8. Bad Debt
A debt that cannot be collected. Bad debts are often written off during a business exit or liquidation in Australia.
9. Bridge Financing
A short-term financing solution used to maintain operations until a business exit can be completed, often in cases of distress.
10. Break Clause
A provision allowing either party to terminate an agreement if specific conditions are not met. Often used in Australian shareholder agreements and sale contracts.
11. Break Fee
A fee payable if one party backs out of a sale after agreeing to terms. Used to cover costs incurred in preparing for the sale or merger.
12. Business Broker
A person in Australia who assists in selling a business "as is" without extensive pre-sale preparation. Usual qualification is certificate III or diploma in real estate practice or property services. They typically handle smaller business sales of $1m-$5m and focus on finding buyers quickly. Specialise in finding financial buyers.
13. Business Broker Fee
In Australia, typically 10-12% of the sale price. For businesses over $5 million, a sliding scale may apply. Brokers often charge an initial fee of up to $20,000.
14. Business Exit
The process by which a business owner or investor leaves a business through sale, merger, or liquidation.
15. Business Succession Planning
Preparing for the transfer of ownership and management of a business, often to family members or employees. Succession is key for family-owned businesses in Australia.
16. Buy-Sell Agreement
An agreement between business owners outlining the terms under which shares may be sold in the event of a triggering event like death or retirement.
17. Capital Gains Tax (CGT)
A tax on profits made from the sale of a business or its assets. In Australia, CGT concessions can apply for small businesses.
18. Capital Gains Tax Roll-Over
A provision allowing deferral of CGT if the proceeds from the sale are reinvested in a similar asset. This is often used for small businesses in Australia.
19. Change of Control Clause
A clause in contracts that triggers certain actions, such as the repayment of debt or termination of contracts, when a business changes ownership.
20. Clawback Provision
A clause allowing a business to reclaim equity or bonuses from executives or employees under certain conditions, such as misconduct. Common in executive contracts during a sale.
21. Cliff Vesting
A type of vesting where employees receive full rights to their equity on a specific date, often used to retain key staff through the exit process.
22. Completion Accounts
Financial statements prepared at the close of a sale to determine the final purchase price. Used for adjusting the sale price based on actual financial performance.
23. Confidentiality Agreement
A legal document requiring parties involved in a sale to keep sensitive information confidential. In Australia, it's often signed before due diligence begins.
24. Contingent Consideration
A part of the sale price dependent on future performance or events. Commonly used in Australian sales to bridge valuation gaps.
25. Corporate Advisor
A more highly qualified professional than a business broker, typically university educated ex-lawyers, ex-accountants, or MBAs. Specialise in improving a business for six-twelve months before a sale to increase its valuation and sale price. Corporate advisors specialise in finding strategic buyers.
26. Corporate Adviser Fee
Typically between 4-6% of the sale price in Australia, with a sliding scale for businesses over $10 million. No upfront fee, but often charge weekly or monthly retainers to cover pre-sale business improvements.
27. Cross Option Agreement
An agreement between business partners allowing the remaining partners to buy the shares of a departing partner, often triggered by death or incapacity.
28. Deferred Consideration
A portion of the sale price paid to the seller over time after the sale, often contingent on the business’s performance post-sale.
29. Deferred Payment
A portion of the sale price deferred to a future date, usually to manage risks or meet post-sale conditions.
30. Deed of Sale
A legal document outlining the terms and conditions of the sale of a business or its assets in Australia. It finalises the transfer of ownership.
31. Deed of Termination
A document that officially ends any legal relationship between the buyer and seller once a sale is completed.
32. Divestment
The process of selling off a business unit, subsidiary, or assets. Common in Australia when companies want to focus on core operations.
33. Drag-Along Rights
A provision that allows majority shareholders to force minority shareholders to sell their shares if the business is being sold.
34. Due Diligence
The process of thoroughly examining the financial, legal, and operational aspects of a business before completing a sale. Due diligence is critical to business exits in Australia.
35. Earn-Out
A structure where the seller receives additional payments based on the future performance of the business. Commonly used to align interests between buyer and seller in Australia.
36. Enterprise Value (EV)
A measure of a company's total value, often used in business sales. It includes market capitalisation, debt, and cash.
37. Escrow
A portion of the sale proceeds held by a third party until specific post-sale conditions are met.
38. Exclusivity Agreement
A contract giving a buyer the exclusive right to negotiate the purchase of a business for a specified period, preventing the seller from negotiating with others.
39. Exit Load
A fee charged to investors when they exit a business or investment, typically used in managed funds or venture capital. Exit loads are designed to cover administrative costs and discourage early withdrawals.
40. Exit Multiple
A ratio used to determine the sale price of a business, based on a multiple of earnings or revenue.
41. Exit Strategy
A plan for how business owners or investors will sell or exit their business, with common strategies including trade sales, IPOs, and management buyouts.
42. Family Business Succession
The process of transferring ownership of a family business to the next generation. Requires careful planning to avoid disputes and ensure smooth transitions.
43. Family Office Exit
A business sale process specifically structured for family-owned businesses, where multi-generational interests, taxes, and wealth management are key factors.
44. Final Settlement
The stage where the purchase price is paid in full, all conditions are met, and the business is officially transferred to the buyer.
45. Forensic Accounting
A specialised form of accounting used to examine financial discrepancies during a business exit or liquidation.
46. Franchise Sale
The sale of a franchise location by a franchisee to another franchisee or the franchisor.
47. Golden Handcuffs
Financial incentives that retain key employees after a sale, often in the form of stock options or bonuses that vest over time.
48. Golden Parachute
Large financial compensation provided to executives if they are terminated following a sale or merger.
49. Goodwill
The intangible value of a business based on its brand, reputation, and customer base. Goodwill is a key part of business valuation in Australia.
50. Goodwill Valuation
The process of estimating the value of a business's goodwill, often a significant factor in determining the overall sale price.
51. Holdback
A portion of the purchase price held by the buyer until certain conditions are met post-transaction, such as meeting performance milestones.
52. Independent Expert Report (IER)
A report that provides an independent valuation of the company, usually required by the ASX for public company takeovers.
53. Initial Public Offering (IPO)
The first sale of a company’s shares to the public, allowing business owners to exit by selling their equity on the ASX.
54. Insolvency
The state of being unable to pay debts when they fall due. In Australia, insolvency often leads to voluntary administration or liquidation.
55. Intellectual Property (IP) Valuation
The process of determining the value of a business's intellectual property (patents, trademarks, etc.) during a business exit.
56. Key Person Clause
A contract provision ensuring the continued involvement of key individuals in the business post-sale.
57. Leveraged Buyout (LBO)
A business acquisition financed primarily with borrowed funds, where the target company’s assets are used as collateral.
58. Liquidation
The process of selling off all assets to pay creditors. Often used in Australia when businesses can no longer remain solvent.
59. Locked Box Mechanism
A pricing structure where the purchase price is fixed based on a historical balance sheet, with no post-completion adjustments.
60. Lock-Up Period
A period during which the seller is restricted from selling shares or transferring ownership post-sale, often used in IPOs.
61. Management Buy-In (MBI)
A transaction where an external management team buys into the business and takes control.
62. Management Buyout (MBO)
A transaction where the existing management team buys the business from its current owners.
63. Market Capitalisation
The total value of a company’s shares on the stock market, often used as a key metric in public company exits.
64. Merger
A transaction where two companies combine to form a single entity, often used as a strategy for exiting a business while maintaining a stake in the merged company.
65. Non-Compete Clause
A clause preventing the seller from starting or joining a competing business for a specified period post-sale.
66. Non-Disclosure Agreement (NDA)
A legally binding agreement to keep sensitive information confidential during negotiations and due diligence.
67. Partial Exit
The sale of part of a business or ownership stake while retaining some equity in the company.
68. Post-Sale Transition
The process of handing over control of the business to the buyer and transitioning operations post-sale.
69. Post-Transaction Integration
The integration of the acquired business into the buyer’s existing operations post-sale, crucial for realising synergies.
70. Pre-Emption Rights
A right giving existing shareholders the opportunity to buy shares before they are offered to outside investors, ensuring they maintain their proportion of ownership.
71. Pre-Pack Administration
A sale of a business arranged before it formally enters administration. This approach can preserve business value in Australia during insolvency proceedings.
72. Private Equity Exit
A strategy where private equity investors sell their stake in a business, often through a secondary sale, IPO, or trade sale.
73. Purchase Price Adjustment
A post-sale adjustment to the purchase price based on the company’s performance or working capital at the time of sale.
74. Recapitalisation
A restructuring of a company's debt and equity to stabilise its capital structure, often as part of an exit strategy.
75. Retention Bonus
A financial incentive paid to key employees to ensure they stay with the company after the sale.
76. Reverse Takeover (RTO)
A process where a private company acquires a publicly listed company to become publicly traded without an IPO.
77. Rights Issue
An offer made by a company to existing shareholders to purchase additional shares, often used to raise capital before an exit.
78. Scrip-for-Scrip Roll-Over
A tax provision that allows shareholders to defer capital gains tax when exchanging shares in a merger or acquisition. Scrip-for-scrip roll-overs are often used in trade sales.
79. Share Buyback
A company repurchases its own shares from shareholders, often as a way to return capital to investors or provide a partial exit.
80. Share Sale
The sale of shares in a company, transferring ownership of the business to the buyer.
81. Shareholder Agreement
A contract between shareholders that governs their rights and obligations, including provisions for exiting the business.
82. Spin-Off
The creation of a new, independent company by separating part of the parent company’s assets or operations.
83. Strategic Buyer
A company that acquires another business for strategic reasons, such as expanding into new markets or acquiring technology.
84. Sweat Equity
Non-cash contribution to a business, typically in the form of time and effort, which may be exchanged for shares in a business exit scenario.
85. Tag-Along Rights
A clause that allows minority shareholders to sell their shares on the same terms as majority shareholders during a sale.
86. Takeover Bid
An offer made by one company to acquire control of another by purchasing its shares.
87. Tax Implications of Sale
The tax liabilities triggered by the sale of a business. In Australia, CGT and GST can apply depending on the structure of the sale.
88. Term Sheet
A non-binding document that outlines the key terms and conditions of a business sale before the final contract is drafted.
89. Trade Sale
The sale of a business to another company in the same industry. A common exit strategy in Australia.
90. Transaction Costs
Expenses incurred in the process of buying or selling a business, including legal, accounting, and advisory fees.
91. Underwriting
The process of ensuring that a business sale will go ahead by guaranteeing to buy any unsold shares during a public offering.
92. Vendor Due Diligence
A pre-sale investigation conducted by the seller to identify potential issues before the buyer’s due diligence process. It can help speed up the transaction process.
93. Vendor Finance
A loan provided by the seller to the buyer to facilitate the purchase of the business. Vendor finance is common in Australian management buyouts.
94. Vesting
The process by which an employee or founder earns the right to receive equity over time, often used to ensure key employees stay with the business post-sale.
95. Voluntary Administration
A process in Australia where an insolvent company appoints an administrator to restructure or liquidate the business to avoid a worse outcome for creditors.
96. Warranty and Indemnity Insurance
Insurance that covers losses arising from breaches of warranties in the sale agreement. It is often used to mitigate risk during Australian business sales.
97. White Knight
A friendly buyer who acquires a company in danger of a hostile takeover, providing an alternative exit for the current owners.
98. Wind-Up
The formal process of closing a business, settling liabilities, and distributing any remaining assets to shareholders.
99. Working Capital
The capital a company uses for day-to-day operations. Ensuring sufficient working capital is essential during the exit process to maintain business continuity.
100. Zombie Company
A company that generates just enough revenue to cover operating expenses but lacks the funds to grow. Zombie companies often have difficulty achieving a business exit.