M&A Transaction Types

Horizontal Acquisition: Buyer acquires a direct competitor in the same industry with the goal of scaling, eliminating competition, gaining market share, etc. For example, one 3PL acquiring another regional 3PL

Vertical Acquisition: Acquisition of a supplier (backward integration) or a customer/distributor (forward integration), commonly seen in manufacturing and transportation

Conglomerate Acquisition: Acquisition of a company in an unrelated industry, often for private equity platform diversification and commonly seen among family offices or holding companies

Asset Purchase: Acquisition of selected assets rather than stock, common in the lower middle market, allowing buyers to choose which liabilities to assume and often preferred in distressed situations

Stock Purchase: Acquisition of a company’s equity, typically simpler operationally, allowing contracts to transfer more easily while assuming existing liabilities (unless indemnified)

Merger (Statutory Merger): Legal combination of two companies into one, which can take the form of a forward or reverse merger and is often seen in larger corporate deals

Majority Recapitalization: Sale of more than 50% of a company while the owner retains a minority stake, common in private equity deals and sometimes called a “second bite at the apple”

Management Buyout (MBO): Transaction in which a company’s management team purchases the business

Management Buy-In (MBI): Transaction in which an external management team acquires a company and takes over its operations

Leveraged Buyout (LBO): Acquisition primarily financed with debt, commonly used in private equity transactions and as a typical structure in the lower middle market

Carve-Out: Separation of a division or subsidiary from its parent company, often involving corporate divestitures and operational complexity

Spin-Off: Transaction in which a public company distributes a division directly to its shareholders

Distressed Sale: Sale of a company facing financial distress, often occurring pre-bankruptcy or as part of an out-of-court workout

All-Cash Transaction: Deal in which the purchase price is paid entirely in cash at closing

Seller Financing: Transaction in which the seller carries a note, commonly used in deals with EBITDA under $10 million

Earnout Structure: Deal feature where part of the purchase price is paid contingent on the company’s future performance

Equity Roll: Transaction in which the seller rolls equity into a new holding company

ESOP Transaction: Sale in which a company is purchased through an Employee Stock Ownership Plan

Platform Acquisition: First acquisition in a particular space for a private equity firm

Add-On/Bolt-On Acquisition: Follow-on acquisition to an existing platform, extremely common in fragmented sectors such as transportation and industrial services

Roll-Up Strategy: Series of acquisitions in a fragmented industry

Cross-Border Acquisition: Transaction in which the buyer and seller are located in different countries

Inbound/Outbound M&A: Transaction in which a foreign buyer acquires a domestic company (or vice versa)