M&A Glossary
91terms defined for ASEAN M&A practitioners.
1
100-Day Plan
A structured action plan covering the first 100 days post-acquisition, focusing on stabilising operations, retaining key people, delivering quick wins, and setting the strategic direction for the combined business. A well-executed 100-day plan sets the cultural tone of the acquisition and builds credibility with the acquired management team.
A
Accounts Payable
Amounts owed by the business to its suppliers for goods or services received but not yet paid for. In working capital analysis, a sudden increase in payables just before closing can indicate the seller is stretching creditors to inflate the cash position — a classic pre-close manipulation technique.
Accounts Receivable
Amounts owed to the business by customers for goods or services delivered but not yet paid for. High debtor days (>60 days for most Malaysian sectors) or a growing receivables balance can indicate collection problems, aggressive revenue recognition, or related-party transactions — all red flags in financial due diligence.
Add-back
A specific expense or loss that is added back to reported profit when calculating normalised EBITDA, on the basis that it will not recur under new ownership. Legitimate add-backs include owner's above-market salary, one-time legal fees, and personal expenses run through the business; the line between legitimate add-backs and manipulation is a central tension in financial due diligence.
Amortisation
The systematic expensing of intangible assets (licences, customer relationships, trademarks) over their useful economic life. Unlike depreciation, amortisation applies to non-physical assets; in normalised EBITDA calculations, both depreciation and amortisation are added back because they are non-cash charges.
Anti-competition Review
An assessment by the Malaysia Competition Commission (MyCC) under the Competition Act 2010 of whether a proposed merger would substantially lessen competition in the relevant market. While Malaysia does not currently have mandatory pre-merger notification (unlike Singapore or the EU), dominant market transactions are subject to post-merger review.
ARR (Annual Recurring Revenue)
The annualised value of all recurring subscription or contract revenue, used as the primary revenue metric for SaaS and subscription businesses. Malaysian technology companies with strong ARR growth command revenue multiples of 3–8x ARR, significantly higher than EBITDA multiples applied to traditional businesses.
Asset Sale
A transaction structure where the buyer acquires specific assets and liabilities of the target rather than the shares in the legal entity. Asset sales are common for smaller Malaysian transactions where a buyer wants a clean start without inheriting the seller's historical liabilities.
Audited Accounts
Financial statements prepared by the company's directors and independently examined by an external auditor, who expresses an opinion on whether they give a true and fair view under MFRS. Under the Companies Act 2016, Malaysian companies with shareholders' funds above RM 2.5M must have audited accounts; these form the foundation of financial due diligence.
B
BNM (Bank Negara Malaysia)
Malaysia's central bank and primary regulator of the financial system, including banks, insurance companies, and foreign exchange transactions. In M&A, BNM's exchange control rules govern remittance of sale proceeds overseas and must be considered in any cross-border transaction involving a Malaysian party.
Book Value
The net asset value of a business as recorded in its financial statements — total assets minus total liabilities. Book value is relevant in asset-based valuations and as a floor for distressed transactions, but in profitable going-concern businesses the market value (enterprise value) typically exceeds book value by a significant margin.
Break Fee
A contractually agreed payment (typically 1–3% of deal value in Malaysia) made by the buyer to the seller if the buyer withdraws from the transaction without contractual justification. Break fees compensate the seller for the time, cost, and opportunity cost of an aborted process.
Bumiputera Equity Requirement
Malaysian government policy requiring a minimum equity stake (commonly 30% in manufacturing, higher in certain other sectors) to be held by Bumiputera investors as a condition of certain licences and approvals. In M&A transactions involving foreign buyers or sector-licensed businesses, Bumiputera equity requirements must be assessed before agreeing deal terms — failure to maintain compliant equity structure can result in licence revocation.
C
Cap Table
A schedule showing the ownership structure of a company, listing all shareholders, their share classes, number of shares, and percentage ownership. In an M&A context, the cap table is the starting point for understanding who must consent to a transaction and how proceeds will be distributed.
Capital Expenditure (Capex)
Spending on fixed assets — machinery, equipment, vehicles, leasehold improvements — that is capitalised on the balance sheet rather than expensed immediately. Buyers must assess the distinction between maintenance capex (necessary to sustain current operations) and growth capex (discretionary), as maintenance capex should effectively be deducted from EBITDA when assessing true free cash generation.
Cash Conversion Cycle
The time (in days) it takes for a business to convert its investments in inventory and other resources into cash flows from sales, calculated as Debtor Days + Inventory Days minus Creditor Days. A shorter cash conversion cycle means less working capital is locked in the business and the operation is more cash-generative.
Churn Rate
The percentage of recurring revenue or customers lost in a given period, typically expressed as an annual rate. In Malaysian SaaS acquisitions, annual churn below 5% is considered healthy; above 15% typically signals product-market fit problems that materially reduce valuation.
CMSL (Capital Markets Services Licence)
A licence issued by the Securities Commission Malaysia under the Capital Markets and Services Act 2007, required for firms that provide regulated capital markets services including investment advice and M&A advisory services involving securities. Operating without a CMSL where one is required exposes individuals and firms to fines of up to RM 10M and imprisonment under Malaysian law.
Comparable Transactions
Historical M&A deals in the same or similar industry, used as benchmarks to determine an appropriate valuation multiple for a target business. In the Malaysian mid-market, the pool of disclosed comparable transactions is thin, requiring advisors to supplement with ASEAN-wide and sector-specific data from international databases.
Completion Accounts
Financial statements prepared as of the completion date of an acquisition, used to calculate a post-closing adjustment to the purchase price based on actual working capital, net debt, and other agreed metrics at the moment of transfer. Completion accounts mechanisms are common in Malaysian transactions but create post-closing uncertainty compared to the locked-box alternative.
Customer Concentration
The degree to which a business's revenue is dependent on a small number of customers — a customer representing more than 20% of revenue is typically considered a concentration risk. High customer concentration in Malaysian transactions results in a lower valuation multiple and often triggers buyer requests for an earnout or customer retention clause.
D
DCF (Discounted Cash Flow)
A valuation method that estimates the present value of a business by projecting its future free cash flows and discounting them back at a rate reflecting risk (the WACC). For Malaysian SMEs, a typical discount rate ranges from 12–15%, making DCF highly sensitive to growth assumptions.
Debt-Free Cash-Free
A deal pricing convention where the enterprise value is stated assuming the business is acquired without any financial debt and without any cash on the balance sheet — adjustments for actual debt and cash at closing are made to arrive at the equity consideration paid. This is the standard pricing basis for most Malaysian private M&A transactions.
Deferred Revenue
Cash received from customers for services or goods not yet delivered, recorded as a liability on the balance sheet. In an acquisition, deferred revenue can be treated as a debt-like item (reducing equity value) because the buyer must deliver the service without receiving additional cash, and its classification in working capital and net debt calculations must be explicitly agreed.
Depreciation
The systematic allocation of the cost of tangible fixed assets (equipment, vehicles, leasehold improvements) over their useful life. Depreciation is added back to arrive at EBITDA, but buyers should assess whether maintenance capex broadly matches or exceeds the depreciation charge — if capex significantly exceeds depreciation, EBITDA overstates true free cash generation.
Due Diligence
The structured investigation a buyer conducts on a target business before completing an acquisition, covering financial, legal, operational, and regulatory matters. In Malaysia, financial DD focuses heavily on normalising EBITDA, while legal DD examines SSM filings, licence currency, and pending litigation.
E
Earn-in
A structure (common in resources and early-stage businesses) where an acquirer earns an increasing equity stake by meeting agreed expenditure or development milestones over time, rather than paying a lump sum upfront. Earn-in structures are used in Malaysian junior mining and plantation transactions to manage geological or operational risk.
Earnout
A contractual mechanism where part of the purchase price is paid after closing, contingent on the acquired business meeting specified financial targets over a defined period. Earnouts bridge valuation gaps between sellers' optimistic forecasts and buyers' conservative assessments, typically representing 20–30% of deal value.
EBIT
Earnings Before Interest and Tax — a measure of operating profitability that excludes financing costs but retains depreciation and amortisation charges. EBIT is used less frequently than EBITDA in Malaysian M&A but is relevant when comparing capital-intensive businesses where depreciation is a real economic cost.
EBITDA
Earnings Before Interest, Tax, Depreciation, and Amortisation — a proxy for the operating cash profit of a business before financing and accounting adjustments. In Malaysian M&A, EBITDA is the primary metric used to derive enterprise value through the application of a sector-specific multiple.
EBITDA Margin
EBITDA expressed as a percentage of revenue, indicating the operating profitability efficiency of the business. Malaysian SME EBITDA margins vary widely: well-run F&B at 12–18%, technology services at 20–35%, manufacturing at 8–15%; higher margins typically support higher acquisition multiples.
EBITDA Multiple
The ratio of Enterprise Value to EBITDA, used to benchmark and derive a business's asking price. If a Malaysian F&B business generates RM 3.2M EBITDA and trades at a 4x multiple, its implied enterprise value is RM 12.8M.
Enterprise Value
The total economic value of a business, representing what a buyer pays for the entire operation including its debt and net of any cash. In a deal, Enterprise Value = Equity Value + Net Debt, and it is the number most commonly quoted when referring to a business's 'asking price' in Malaysian M&A.
Enterprise Value to EBITDA
The ratio of Enterprise Value to EBITDA — the fundamental valuation multiple used in Malaysian M&A to benchmark transaction prices against comparable deals. A business trading at 4x EV/EBITDA means a buyer pays four times the annual operating profit to acquire it.
Equity Value
The value attributable to the shareholders after accounting for net debt — calculated as Enterprise Value minus net debt (total debt less cash). When a buyer acquires shares in a company, the price paid per share reflects equity value, not enterprise value.
Escrow
A portion of the purchase price held by a neutral third party (typically a law firm's client account in Malaysia) pending satisfaction of agreed conditions such as the resolution of indemnity claims. Escrow arrangements in Malaysian M&A commonly hold 5–15% of deal value for 12–24 months post-closing.
Exclusivity
A period during which the seller agrees not to negotiate with other potential buyers, typically triggered by the signing of an LOI and running for 30–90 days in the Malaysian market. Exclusivity protects the buyer's investment in due diligence but can disadvantage a seller who has not yet run a competitive process.
F
Financial Buyer
An acquirer (typically a private equity fund or family office) that buys businesses primarily for financial return, using a combination of debt and equity, and plans to exit within 3–7 years. Financial buyers in Malaysia include funds like Navis Capital, Creador, and RHL Ventures, and they evaluate acquisitions based on IRR targets rather than strategic synergies.
Free Cash Flow
The cash generated by the business available to all capital providers (debt and equity) after deducting maintenance capex and changes in working capital. Free cash flow is the most accurate measure of a business's ability to service acquisition debt and is the input metric in DCF valuation.
G
Goodwill
The premium paid over the identifiable net assets of an acquired business, representing intangible value such as brand, customer relationships, and assembled workforce. Under MFRS 3, goodwill arising on acquisition is not amortised but must be tested annually for impairment — a significant post-acquisition accounting obligation.
Gross Margin
Revenue minus cost of goods sold (or cost of services), expressed as a percentage of revenue — the profit retained after directly delivering the product or service. SaaS businesses in Malaysia typically achieve 70%+ gross margins; F&B businesses typically 60–70% on food cost alone; manufacturing ranges from 20–40%.
I
Indemnification
An obligation under the SPA for one party (usually the seller) to compensate the other for losses arising from a breach of representations, warranties, or specific identified risks. Indemnities in Malaysian transactions typically have survival periods of 12–36 months and financial caps of 20–100% of deal value.
Industry Multiple
The typical EV/EBITDA range applied to businesses in a specific industry, derived from comparable transactions and publicly listed company trading multiples. Malaysian industry multiples vary significantly: F&B SMEs trade at 3–5x, technology at 5–8x, healthcare at 6–10x, and traditional manufacturing at 3–4x.
Information Memorandum
A comprehensive document (typically 30–60 pages) prepared by the seller's advisor that provides qualified buyers (who have signed an NDA) with detailed financial, operational, and strategic information about the target business. The information memorandum forms the basis for a buyer's initial valuation and bid in a structured M&A process.
K
Key Person Risk
The risk that a business's value is dependent on one or a small number of individuals — typically the owner-founder — whose departure would materially harm revenues, customer relationships, or operational capability. Key person risk is the single most common factor that reduces acquisition multiples in Malaysian SME transactions.
L
Leveraged Buyout (LBO)
An acquisition financed predominantly with debt (typically 60–70% of deal value), with the acquired business's own cashflows used to service and repay the debt. LBO structures are common in PE-backed acquisitions in Malaysia and ASEAN, and the maximum leverage is constrained by the target's ability to generate stable free cash flow.
Locked Box
A transaction mechanic where the economic risk and reward of the target business transfers to the buyer from a historical 'locked box' reference date, with the purchase price fixed at signing and no post-closing adjustment for working capital movements. Locked-box structures give both parties pricing certainty and are increasingly common in Malaysian mid-market transactions.
LOI (Letter of Intent)
A document that outlines the principal terms of a proposed acquisition before the final Sale and Purchase Agreement is drafted — typically non-binding on price but binding on exclusivity, confidentiality, and break fees. In Malaysian M&A, an LOI marks the transition from exploratory negotiations to formal due diligence.
M
Management Accounts
Internally prepared financial statements — typically monthly or quarterly — that give the management team a current view of business performance without waiting for annual audited accounts. In Malaysian M&A due diligence, buyers request at least 12 months of management accounts to bridge the gap between the most recent audited year and the present.
Management Buyout (MBO)
A transaction where the existing management team acquires the business from the owner, typically financed with a combination of bank debt, vendor financing, and management equity. MBOs are an increasingly used exit mechanism in Malaysia when an owner wants business continuity and no suitable external buyer is available.
MAS (Monetary Authority of Singapore)
Singapore's central bank and integrated financial regulator, responsible for licensing financial institutions including capital markets service providers under the Securities and Futures Act. In cross-border Malaysia–Singapore M&A transactions, a Singapore-licensed advisor providing regulated advice to Singapore-domiciled parties must hold the appropriate MAS licence.
Material Adverse Change
A contractual condition that allows a buyer to withdraw from a transaction if a significant negative event occurs between signing and closing that fundamentally changes the target business. What constitutes a 'material adverse change' is heavily negotiated in the SPA, as courts interpret such clauses narrowly.
MFRS (Malaysian Financial Reporting Standards)
The accounting standards framework adopted in Malaysia, converged with IFRS (International Financial Reporting Standards), that governs how financial statements are prepared and presented. In M&A, the shift to MFRS 16 (leases) has a meaningful impact on reported EBITDA by capitalising operating leases and reducing the lease expense above the EBITDA line.
Minority Discount
The reduction in value applied to a minority equity stake in a private company, reflecting the lack of control, limited liquidity, and inability to force a sale or dividend. Minority discounts of 20–35% are common in Malaysian valuation reports for non-controlling interests in private companies.
MRR (Monthly Recurring Revenue)
The monthly value of recurring subscription or contract revenue — ARR divided by 12. MRR is used operationally to track momentum month-to-month, while ARR is used for valuation; buyers scrutinise MRR trends to identify churn and growth acceleration.
Multiple
A ratio that expresses a business's value as a factor of a financial metric, most commonly EBITDA or revenue. Malaysian mid-market transactions typically apply multiples of 3–7x EBITDA depending on sector, growth profile, and deal size.
N
NDA (Non-Disclosure Agreement)
A legally binding contract under the Contracts Act 1950 (Malaysia) that restricts the recipient of confidential information from using it outside the purpose of evaluating the transaction. In M&A, the NDA must be signed by the buyer before the seller discloses detailed financial information or the identity of the business.
Net Asset Value
The value of all assets minus all liabilities, representing the liquidation floor of a business. In Malaysian M&A, NAV is the primary valuation basis for holding companies, property companies, and investment vehicles, rather than the earnings-based methods applied to operating businesses.
Net Revenue Retention
The percentage of recurring revenue retained from an existing cohort of customers after accounting for churn, contraction, and expansion — an NRR above 100% means existing customers are growing faster than they churn. NRR above 110% is a strong indicator of product stickiness and is a premium multiple driver for Malaysian technology acquisitions.
Non-compete Clause
A contractual restriction in the SPA preventing the seller from competing in the same business for a defined period and geographic scope after closing. In Malaysia, courts apply a reasonableness test under the Contracts Act 1950 (Section 28) to restraint of trade clauses — overly broad non-competes (beyond 3 years or unlimited geography) risk being unenforceable.
Normalised Earnings
Adjusted earnings that reflect the true ongoing profitability of a business by removing one-time, non-recurring, or owner-specific items. Buyers and sellers often negotiate vigorously over which items constitute legitimate normalisations, as the normalised figure directly drives the acquisition price.
O
OJK
Otoritas Jasa Keuangan — the Indonesian Financial Services Authority that regulates banking, capital markets, and insurance in Indonesia. For ASEAN M&A transactions involving Indonesian targets, OJK approval is typically required for acquisitions in regulated financial-sector businesses.
P
PDPA (Personal Data Protection Act)
Malaysia's primary data privacy law — the Personal Data Protection Act 2010 — that regulates the processing of personal data of individuals in commercial transactions. In M&A, PDPA compliance is a due diligence item: buyers must assess whether the target has collected, processed, and stored personal data lawfully, and plan for the transfer of that data to new ownership.
PDPO
The Personal Data (Privacy) Ordinance — Hong Kong's data privacy law, administered by the Privacy Commissioner for Personal Data, that governs the collection and use of personal data. For ASEAN M&A transactions involving Hong Kong-connected businesses, PDPO compliance is a parallel consideration alongside Malaysia's PDPA.
Post-merger Integration
The process of combining two organisations after an acquisition closes — aligning systems, culture, people, and processes to realise the strategic rationale for the deal. Studies consistently show that failed post-merger integration is the primary reason acquisitions fail to deliver expected returns; Malaysian deals face additional complexity from multicultural workforce dynamics.
Precedent Transactions
Completed M&A transactions used as valuation benchmarks — the most direct evidence of what buyers have historically paid for comparable businesses. Precedent transactions typically imply higher multiples than trading comparables because they include a control premium paid to acquire a majority stake.
Price to Earnings
A valuation ratio expressing equity value as a multiple of net profit after tax. P/E ratios are more commonly used for listed companies on Bursa Malaysia; private M&A typically relies on EV/EBITDA because it is capital-structure-neutral and less affected by differing tax structures.
Q
Quality of Earnings
An analysis of whether a business's reported EBITDA accurately reflects recurring, sustainable operating profit by examining add-backs, revenue recognition policies, and the reliability of management accounts. A quality-of-earnings report is a key deliverable in financial due diligence and can significantly reduce or increase the normalised EBITDA used for valuation.
R
Regulatory Clearance
Approval from a relevant government authority required before an M&A transaction can be completed, such as the Malaysia Competition Commission (MyCC) for transactions that may substantially lessen competition, or sector-specific ministry approvals for regulated industries. Obtaining regulatory clearance can add 2–6 months to a Malaysian transaction timeline.
Representations and Warranties
Statements of fact made by the seller (and sometimes the buyer) in the SPA about the condition of the business, its assets, liabilities, licences, and legal standing at the time of closing. If a representation or warranty is found to be false post-closing, the buyer may have a claim for indemnification under the SPA.
Retention Package
A financial incentive (cash bonus, equity stake, or deferred consideration) offered to key employees to ensure they remain with the business through and beyond the acquisition process. In Malaysian M&A, retention packages are commonly structured as 12–24 month stay bonuses payable post-closing, and their cost is often factored into deal pricing.
Revenue Multiple
Enterprise value expressed as a multiple of revenue, used for businesses that are pre-profit or where revenue is a better comparator than EBITDA. Revenue multiples are most common in technology M&A; applying revenue multiples to traditional businesses without strong recurring revenue characteristics is a valuation error.
RPGT (Real Property Gains Tax)
A Malaysian tax levied on gains from the disposal of real property or shares in real-property companies (companies where more than 75% of tangible assets are real property). RPGT rates in Malaysia range from 0–30% depending on the holding period and whether the seller is a Malaysian citizen, non-citizen, or company.
S
SC (Securities Commission Malaysia)
The statutory body that regulates Malaysia's capital markets, including the licensing of capital markets services providers under the Capital Markets and Services Act 2007. The SC issues the Capital Markets Services Licence (CMSL) required by firms that provide investment advice, deal in securities, or carry out M&A advisory activities.
SDE (Seller's Discretionary Earnings)
A pre-tax earnings measure used for owner-operated businesses that adds back the owner's salary, personal expenses run through the business, interest, depreciation, and one-time items to net profit. SDE is the standard valuation metric for Malaysian SMEs with revenue below RM 5M, where the owner's personal compensation significantly distorts reported profit.
Secondary Buyout
A transaction where a private equity fund sells a portfolio company to another private equity fund, rather than to a strategic buyer or via IPO. Secondary buyouts are increasingly common in ASEAN as the private equity market matures, offering a liquidity exit when strategic buyers or public markets are unavailable.
Sector Multiple
The valuation multiple applied to businesses in a particular sector, reflecting the market's assessment of growth, risk, capital intensity, and recurring revenue characteristics for that sector. Sector multiples shift over time as investor sentiment, interest rates, and sector fundamentals change.
SPA (Sale and Purchase Agreement)
The definitive legal agreement that documents all terms of an M&A transaction, including price, structure, representations and warranties, conditions precedent, and completion mechanics. The SPA is the binding contract that governs a transaction and is typically preceded by the LOI.
Specific Performance
A legal remedy under Malaysia's Specific Relief Act 1950 that compels a party to fulfil a contractual obligation, rather than merely awarding damages. In M&A, specific performance is particularly important as a remedy for NDA breaches where monetary damages are difficult to quantify, and is commonly invoked for obligations to complete a transaction where damages are an inadequate substitute.
SSM (Suruhanjaya Syarikat Malaysia)
The Companies Commission of Malaysia — the statutory body that administers the Companies Act 2016, registers all Malaysian companies, and maintains public records of directors, shareholders, charges, and annual filings. In M&A due diligence, an SSM search is the first step to verify a target's legal existence, ownership structure, and any registered charges on assets.
Stamp Duty
A Malaysian government tax on legal instruments, including share transfers (0.3% ad valorem on the higher of consideration or market value) and property transfers (1–4% on a tiered scale). In deal structuring, stamp duty treatment is a key differentiator between share sales and asset sales.
Strategic Buyer
An acquirer that operates in the same or an adjacent industry as the target and is buying for strategic reasons — market expansion, vertical integration, eliminating a competitor, or acquiring technology. Strategic buyers in Malaysia typically pay a higher multiple than financial buyers because they can realise synergies unavailable to a pure investor.
Supplier Concentration
The degree to which a business depends on a small number of suppliers for critical inputs, creating vulnerability to supply disruption, price increases, or relationship deterioration post-acquisition. Supplier concentration is assessed in operational due diligence and may require the buyer to negotiate direct supply agreements before closing.
T
Trade Sale
The sale of a business to a strategic buyer (another operating company) as opposed to a financial buyer (private equity or family office). Trade sales typically achieve higher multiples than PE exits because the buyer can pay for synergies, making them the preferred exit route for Malaysian SME owners.
V
Vendor Note
A form of deferred consideration where the seller extends credit to the buyer for a portion of the purchase price, typically 10–30%, repaid over 3–5 years at a negotiated interest rate. Vendor notes are increasingly common in Malaysian mid-market deals to bridge financing gaps and align seller incentives with buyer performance.
W
Working Capital
The net short-term operating assets of a business, calculated as current assets (receivables, inventory) minus current liabilities (payables, accruals), representing the capital locked up in day-to-day operations. Working capital adjustments in Malaysian acquisitions ensure the buyer receives the business with an agreed level of operational liquidity at completion.
Working Capital Adjustment
A post-closing or at-closing adjustment to the purchase price that ensures the buyer receives the business with an agreed level of net working capital, protecting against the seller extracting cash by accelerating collections or deferring payments before closing. In Malaysian transactions, working capital adjustments must be carefully defined — including which items are 'in' and 'out' of the calculation.