The words you will hear when you sell

• A
• B
• C
• D
• E
• G
• H
• I
• K
• L
• M
• N
• P
• R
• S
• T
• V
• W

A

Add-backs

Costs in your accounts that a new owner would not have, added back to your profit to show what the business really earns. The usual ones are a salary you pay yourself above the going rate for the job, a family member on the payroll who does not work in the business, and one-off costs such as a legal dispute or an office move.

For example: A one-off tribunal settlement, or a relative on the payroll who does no work in the business.

Asset sale

The buyer buys what the business owns and uses (vans, equipment, contracts, the name and the customer list) rather than the shares in your company. The company stays yours, with its history and anything it owes, and the money is paid to the company rather than to you. The tax works differently from a share sale, so take advice early on which one suits you.

B

BADR (Business Asset Disposal Relief)

A tax relief that cuts the Capital Gains Tax you pay when you sell a business you own and work in. On sales from Mon 6th Apr 2026 it taxes up to £1m of gains over your lifetime at 18%, where a higher-rate taxpayer would otherwise pay 24%. The rate was 10% until Sat 5th Apr 2025 and 14% in the 2025/26 tax year. Whether you qualify depends on your shareholding and your role in the business, so check with your accountant.

Bolt-on

A smaller business a buyer adds to one they already own, often a firm in the same trade in a new area. A bolt-on plugs into the buyer's existing office, systems and management, so it adds customers and engineers without adding much overhead.

For example: An electrical contractor buying a smaller firm for its testing and inspection contracts.

Buy-and-build (roll-up)

A buyer, often backed by private equity, buys one sizeable business, which becomes the platform, and then adds smaller ones to it, building a larger group that is worth more than the parts.

C

Capital Gains Tax (CGT)

The tax on the gain you make when you sell something for more than it cost you, including the shares in your company. A higher-rate taxpayer pays 24% on most gains. BADR can bring the first £1m of qualifying gains down to 18%.

Cash-free, debt-free

The usual basis for a price. The buyer values the business as if it had no cash and no borrowing, then adds any spare cash it has on the day and takes off any loans, so you are paid for the cash you leave in.

Change of control

A clause in a contract that lets the customer or supplier end or renegotiate it if the company's owner changes. Buyers check every large contract for one, because a key customer walking away on the sale would change the price.

Completion

The day the sale is legally done: the contract signed, the money paid and the business handed over.

Completion accounts

A set of accounts drawn up just after the sale to show the cash, debt and working capital the business actually had on the day. The price then moves up or down to match. The alternative is a locked box.

Consideration

The price, in lawyers' language: everything the buyer gives you for the business, whether it is paid on the day or later.

Consolidator

A company, usually backed by investors, that is buying many firms in the same trade to build one large group. Most of the larger buyers in the trades today are consolidators.

D

Data room

A secure online folder where you put the documents a buyer asks for during due diligence: accounts, contracts, staff records, certificates. Only the people you approve can see it.

Deferred consideration

Part of the price paid after the sale on fixed dates, rather than on the day. Unlike an earn-out it does not depend on how the business performs, but you are still relying on the buyer to pay it, so how it is secured matters.

Drawings

Money an owner takes out of the business for themselves. A buyer looks at what you have drawn alongside your salary to work out what the business really earns.

Due diligence

The buyer's detailed check of your business before they commit: accounts, contracts, staff, insurance, certifications and anything legal. Expect several weeks of questions and requests for documents. Most problems that reduce a price are found here, which is why preparing for it early pays.

For example: A buyer will ask for your NICEIC or NAPIT records, test certificates and your contract list.

E

Earn-out

Part of the price paid later, and only if the business hits agreed targets after the sale, such as a level of profit or sales. It lets a buyer pay for growth they cannot yet see, but the risk of those targets sits with you, and after the sale the buyer runs the business.

For example: Part of the price paid later, only if your testing and inspection contracts renew.

EBITDA

Earnings before interest, tax, depreciation and amortisation. Put simply, the profit the business makes from its day-to-day work before loan interest, tax and the accounting cost of vans and equipment wearing out. Buyers use it because it lets them compare businesses that are funded differently. Adjusted EBITDA is the same figure after add-backs.

Enterprise value

The value of the business itself, before any debt is taken off or spare cash added. What you receive for your shares is usually the enterprise value, less what the company owes, plus the cash it holds.

Exchange (of contracts)

The point at which both sides sign the sale contract and are committed to it. Completion, when the money moves and the business changes hands, can follow on the same day or later.

Exclusivity

A period, usually agreed at heads of terms, when you promise not to talk to other buyers while one buyer does its checks. Keep it as short as you reasonably can.

Exit

Selling the business, or stepping back from it. When advisers talk about your exit, they mean how and when you leave, who takes over, and what you take with you.

G

Goodwill

The part of the price above the value of the things you can touch, such as vans, stock and equipment. It is what a buyer pays for your customers, your contracts, your reputation and your name.

H

Heads of terms

A short document setting out the main points of the deal (the price, how and when it is paid, what is included and the timetable) before the lawyers draft the full contract. Most of it is not legally binding, but it frames everything that follows, so it is worth getting right.

I

Information memorandum

The detailed document about your business that serious buyers see once they have signed an NDA: what you do, your customers, your team, your figures and why you are selling.

K

Key person dependency

When the business relies on one person, often the owner, for its customers, its know-how or its certifications. Buyers see it as a risk, and may pay less or tie more of the price to an earn-out until it is reduced.

L

Locked box

A way of fixing the price from accounts drawn up at a date before the sale. From that date the value is treated as locked in and you agree not to take money out, so nothing is adjusted after the deal. The alternative is completion accounts.

M

M&A (mergers and acquisitions)

Mergers and acquisitions: the buying, selling and joining together of businesses. An M&A market or M&A activity simply means businesses being bought and sold.

Management buyout (MBO)

Your own managers buy the business from you, usually with help from a lender or an investor, and often with part of the price paid to you over time. A management buy-in (MBI) is the same idea with a manager from outside.

Multiple

The number a buyer multiplies your yearly profit by to reach a price. If the business makes £300,000 a year and a buyer offers a multiple of four, the price is £1.2m. Always check which profit figure is being multiplied: EBITDA, SDE or profit after tax give very different answers.

N

NDA (non-disclosure agreement)

A confidentiality agreement a buyer signs before seeing anything that identifies your business. They promise to keep what they learn to themselves and not to use it against you, for example to approach your staff or customers.

Normalised profit

Your profit with add-backs made and one-off items taken out, so it shows what a normal year looks like for a new owner. It is usually the profit figure a buyer's multiple is applied to.

P

Private equity (PE)

Investment firms that buy companies with money pooled from pension funds and other investors, aiming to grow them and sell them on within a few years. A PE-backed buyer is a company owned by one of these firms, often one building a group through buy-and-build.

R

Recurring revenue

Income that comes back every month or year without having to be won again, such as maintenance contracts, service agreements and monitoring fees. Buyers value it more highly than one-off work because they can count on it.

Retention (of the price)

Part of the price held back, often in a separate account, for an agreed period after the sale, to cover any claims under the warranties. Whatever is not claimed is then paid to you.

Retentions (on contracts)

Money a main contractor holds back from what it owes you, usually a few per cent of each payment, until the work has been finished and any defects put right. A buyer will ask how much is owed to you in retentions and how likely it is to be paid. Not the same as a retention of the sale price.

RMR (recurring monthly revenue)

The income you receive every month from monitoring, maintenance and service contracts. Buyers of security and fire businesses often value it separately from one-off installation work, because it keeps coming in.

Run-rate

A yearly figure worked out from recent months, for example the last three months of contract income multiplied by four. Useful when a business is growing, but a buyer will test whether it holds.

S

SDE (seller's discretionary earnings)

Profit with the owner's own pay and personal perks added back. It is used for smaller owner-run businesses, where the buyer will step into the owner's role and wants to know what the whole job earns.

Share sale

The buyer buys the shares in your limited company, so they take on the whole company: its contracts, its staff, its history and anything it owes. Most owner-run limited companies sell this way, and the money comes to you as the shareholder. Compare with an asset sale.

SPA (share purchase agreement)

The main legal contract for a share sale. It sets out the price, how it is paid, the warranties and indemnities you give, and what happens if something goes wrong. In an asset sale the same job is done by an asset purchase agreement (APA).

T

Teaser

A short, anonymous summary of your business sent to possible buyers first, so they can say whether they are interested without learning who you are.

Trade buyer

A business in your own trade, or a close one, buying you to grow. The alternative is a financial buyer, such as a private equity firm, buying you as an investment.

TUPE

The Transfer of Undertakings (Protection of Employment) rules. When a business is sold as an asset sale, or a contract moves to a new provider, TUPE moves the staff across on their existing terms, with their length of service intact. In a share sale the employer does not change, so TUPE does not apply.

V

Vendor finance

Where you, the seller, lend the buyer part of the price and they pay you back over time, often with interest. It helps a buyer who cannot raise the whole amount, but that part of your money depends on the business doing well after you leave.

W

Warranties and indemnities

Warranties are statements about the business that you confirm in the sale contract, such as the accounts being accurate and there being no disputes you have not mentioned. If one proves untrue and the buyer loses money, they can claim against you, unless you told them about it in writing first. An indemnity is a promise to repay the buyer pound for pound if one specific, known problem costs them money, such as an open tax enquiry.

Working capital

The money tied up in running the business day to day: what customers owe you, plus stock, less what you owe suppliers. A buyer expects a normal level of it to be left in the business on the day of the sale, and the price is adjusted if there is more or less.