51 key terms across all three modules — with formulas, examples, and related terms.
Return earned above what CAPM predicts given the asset's beta.
A riskless profit from exploiting price discrepancies for identical assets.
A structured sale process run by the seller to maximise competition and price.
Sensitivity of an asset's return to market movements. Measures systematic risk.
A legally binding bid submitted after full due diligence, typically at D+90.
A portfolio optimisation model that combines market equilibrium returns with investor views.
Penalty paid by the target if it walks away from a signed deal (typically 1–3% of EV).
Model stating expected return = risk-free rate + beta × equity risk premium.
The efficient frontier when a risk-free asset is available; connects r_f to the tangency portfolio.
Price mechanism where the final deal price is adjusted at closing based on the closing-date balance sheet.
A tradeable instrument that pays out if specified milestones (e.g. FDA approval) are achieved post-close.
The tendency to sell winners too early and hold losers too long, driven by loss aversion.
A share structure where different classes carry different voting rights, allowing founders to retain control.
A deferred payment mechanism where part of the acquisition price depends on future performance.
The set of portfolios offering the highest expected return for a given level of risk.
Whether a deal increases (accretive) or decreases (dilutive) the acquirer's earnings per share.
The calculation that converts Enterprise Value to the equity value received by target shareholders.
Extension of CAPM adding size (SMB) and value (HML) factors to explain returns.
Scalability, Sunkenness, Spillovers, Synergies — the four properties that make intangibles different.
The residual after subtracting the fair value of identifiable net assets from the purchase price.
The value factor in Fama-French: long high book-to-market stocks, short low book-to-market stocks.
Non-physical assets without physical substance: brands, patents, R&D, customer relationships, software.
Frictions that prevent rational investors from fully correcting mispricings.
Price mechanism where the deal price is fixed at signing based on a historical balance sheet.
The tendency to feel losses approximately twice as intensely as equivalent gains.
A clause allowing the buyer to walk away if the target suffers a material adverse change between signing and closing.
Obligation to offer for 100% of shares once an acquirer crosses the 30% threshold (France/EU).
The hypothesis that asset prices fully reflect all available information.
Markowitz's framework for constructing optimal portfolios by balancing expected return and variance.
An indicative, non-binding bid submitted at ~D+20 in an M&A auction.
The value achievable in an orderly sale of an intangible asset to a willing buyer.
Operating profit after tax, excluding financing costs. Used in ROIC calculation.
The tendency for stock prices to continue drifting in the direction of an earnings surprise for weeks after the announcement.
A defence allowing existing shareholders to buy new shares at a discount if a hostile bidder crosses a threshold.
The accounting process of allocating the acquisition price to identifiable assets and liabilities at fair value.
The no-arbitrage relationship between call price, put price, stock price, and present value of strike.
Analytical adjustment to treat R&D as an investment (capitalised) rather than an expense.
An income-based method for valuing trademarks: value = PV of royalties the firm is relieved from paying.
NOPAT divided by Invested Capital. Measures how efficiently a firm generates returns on its capital base.
Excess return per unit of total risk (standard deviation).
The size factor in Fama-French: long small-cap stocks, short large-cap stocks.
The graphical representation of CAPM: plots expected return against beta for all assets.
The main legal contract in an M&A transaction, signed after the Binding Offer is accepted.
Compulsory acquisition of remaining minority shares once the acquirer reaches 90–95%.
A board structure where directors serve staggered terms, so only 1/3 can be replaced per year.
Value created by combining two businesses that neither could achieve independently.
The risky portfolio that maximises the Sharpe ratio. All investors should hold this portfolio of risky assets.
All investors hold the same risky portfolio (tangency portfolio); risk aversion only determines the split with the risk-free asset.
The blended cost of capital, weighted by the proportions of debt and equity in the capital structure.
A friendly acquirer invited by the target to outbid a hostile bidder.
An adjustment to the deal price reflecting the difference between actual and normalised working capital at closing.
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