Victoire's Blog

Summarizing and assessing

It's time to write the last post, it's also time to take stock of the "Weallcan" experience.

1) What about my coach's job?

In a few words, here are the main things I'll retain about an M&A manager in an industrial group.

• first, call him Negotiator
• then, it seems that he spends most of his time fighting against every complication coming from the big complexity of business law, tax law...
• you have to remember the differences between this job and M&A as it is often known, I mean in a bank (see the interviews)
• he looks closely into many activities one after the other, and today I guess that Dominique knows a lot about very different activities of the group
• he interacts with a lot of different people inside and outside the group, always new faces

I stop there because I feel I could write another whole page, and I said I 'd be brief... What do you think of these few words as a real conclusion:

Communication, reflexion and negotiation.

2) What about my own experience?

There were several objectives at the beginning of the program. Did we reach them?

_ The first objective was to get to understand a job, through a day at work with my coach Dominique and a lot of communication the weeks after. During the Alcan Day, I was the special guest of Dominique: he had organized for me some appointments with his colleagues, he was very comprehensive to answer all my naïve questions... Moreover, I could really feel the atmosphear of Alcan and have a global impression about M&A. As it is sometimes a very technical job, I couldn't understand everything; but I've learnt a lot about management, finance and life at work during this day.

Then, through the different themes we had to develop every week, I was led to ask many technical or precise questions to Dominique. This was very different.

Let me try try to explain this: first, I "understood" the job while having a global feeling about it, seeing direct what it consists in, and living a day at work. But the second approach was really more precise, and I have now a little knowledge about some details of this job, that I couldn't have just after my Alcan Day.

To conclude this point, the two parts of the program were really complementary.

_ The second objective was to testify about our experience on this weblog, and to let people around us know about everything we learnt; I hope I've done a good job, and I can see that they were some very relevant commentars from my friends, from the students of the program or other people. These questions and commentars helped me to know a bit more about the job and about technical points.

Through this weblog, I've also improved my English, and you can see that I badly needed it...

_ The third "objective" was to have a good group of students in this program; we have met in Paris and will meet again for the final event on May 26th. All of us have a lot in common and also a lot of different experiences and backgrounds; we have communicated a lot during these two months, through our blogs, the forum and messenger services; and it's not finished!

3) And now?

This experience confirm the financial orientation of my studies; my understanding of the M&A job confirmed me, as all the people I met during my Alcan Day did, that it would be a good thing for me to study law in this objective.

I think I could make this job later, I mean once I've gained some knowledge and achevied a few years of experience... I really liked the mix of action and reflexion in this job, and I love complicated things. Of course, there are many kinds of jobs I could do and I'm not telling you that I found a vocation thanks to Dominique! But this is really the kind of job that could fit to me.

4) Final thanks...

...to the WAC team for all the work they did! We could always count on them, and the whole experience was really well organized.

... to Dominique, who was always ready to answer my questions, even while working 22 hours a day...

... to all readers. I hope you've learnt some interesting things here!

5) This is the real conclusion.

Since I've entered my school in September, I've seen loads of communication strategies of different firms. Stands, buffets, PowerPoint presentations, sponsoring, gifts...

Weallcan is one of the best ideas I've seen, because in the rules of the program we were considered as well as students than as would-be professionals; because we have effectively learnt a lot about a particular job in a particular firm and striked up relationships; and because they were also, included in it, wonderful buffets, gifts and PowerPoint presentations...

Challenge, performance and contribution

" What makes the difference in the completion of a puzzle?

Contribution.

Each job in the company is essential to its growth. How key is your coach's job? How does your coach assess his/her contribution? Where do the corporate values and strategic directives of the Group (EHS, Maximising Value, Continous Improvement) impact? what challenges does your coach face? How can your coach remain motivated and productive?"

Value creation

As I told you before, Alcan has a value-based management (*). This means that the first purpose of Dominique is to maximize shareholder value with his operations.

I'll try to explain why it is important.

First, it's important because Travis Engen has decided it; the CEO has given a objective of value creation for Alcan : the "warranted equity value" (*) has to double within 5 years.

Put in a different way, it is important for Alcan because Alcan does not only compete in the market for its products: it also competes in the capital market, for investors' favor and savings. An investor wants a high return on investment, actually, he wants to get more money than if he had deposited his capital on a simple bank account. Alcan's share price will increase if the company creates value, because more investors will recognise it and want to buy Alcan's share.

How does one know if value has been "created"?

Several ways exist to measure the value creation. Generally speaking, if the return is higher than the cost of capital, you create value. This is the EVA (economic value added) principle. For Alcan, EVA is measured by the "net operating profit after tax" (NOPAT), less the cost of capital, conventionnally 10% times the capital invested.

The "financier" point

I've asked myself: why 10%?

You not only have to consider that the investor could deposit its money on a bank account (where he could expect a return of something like 3%); there are many other ways of investing money: real estate, art, shares and bonds... The more risk there is, the higher the return you can expect.

So, the risk of investing in Alcan was measured, according to several features: interest rates, the society, the fact that profits are recurring, the debt/capital structure, the price of dollar and of aluminium. This risk was assessed differently for banks (debt) and for shareholders (equity): banks are paid back first, so their risk is lower than the one of shareholders. They ask for less than 10% of return, and the shareholders ask for more than 10%. On a weighted average, and also because 10% is a convenient figure, the global cost of capital was evaluated at 10%.

So, each dollar that Alcan invests in a business has to produce 10 cents a year. lf it produces more, it "creates" value; if not, it "destroys" value.

Enough of this. Let's talk about Dominique. How does he participate in this value creation objective?

If you've read what's above, it's easy to understand:

• an acquisition must have a positive EVA
• a divestiture brings in capital, that was invested in businesses with small or negative EVA, and will be invested in other businesses that have a stronger EVA.

Given this, how does Dominique know whether he has done a good job or not?

Very simple (!): alcan's executive committee sets some strategic objectives for the company, involving proposed divestitures and acquisitions in certain markets. He is happy when he has contributed to meeting these objectives and when people from the businesses are satisfied.

But it's not easy to create value every day.

Like for everything, there are many challenges to face during a professionnal day for my coach. For example, when Dominique tries to sell a business, the potential buyers can give up the deal whereas the process had already progressed, or the price can fall; there are often technical difficulties to solve (fiscal, administrative, legal issues).

But as many employees of Alcan and any other firm, my coach has several ways of remaining motivated even when the job is tough:

recognition from above when he has done his work efficiently, career prospects, a good team and a good environment at work, a good understanding and adhesion to Alcan's objectives...

What, did I forget something? Money? Oh please, the last paragraph proves that Dominique can be very happy of doing this job without getting a very high salary, can't he?

Index

You're lost?

You don't know which page to visit first?

Don't worry. Here comes your salvation, I've wrote this in order to guide you in the complexity of this site:

The index

1) if you're wondering what's going on on this website and who all these students speaking of Alcan are, try this presentation of the program; when you've read it and know what an "Alcan Day" is, you can know how my Alcan Day happened.

2) the two pages "about my coach" and "about me"  deal with morphology, taxonomy and philogeny of coleoptera. You should have guessed that.

3) several pages can help you to know a bit more about Mergers and Acquisitions (generally or by Alcan) and about finance: go and have a look at :

_ the interviews, in which two M&A specialists give a very clear commentar about their job and answer all the questions you can have about M&A... and Alcan

_ the glossary, in which several technical words are defined: I've written the definitions myself, so that you can understand them even if you're not a very financial person...

_ this concrete example which is a very clear illustration of my coach's job. If I were you and had just little time to visit this site, I'd begin with this one.

4) Finally, all of us (the students) write a little contribution every week, about a topic given by the WAC team. We have to think of this topic linked to our coach's job. So far, there are three of them: clients and suppliers, international, and innovation. The fourth topic is coming soon...

And remember, if you want to express your deception, your admiration, your astonishement, your incomprehension, your happiness...  feel free to post any comment you think of! I'll answer you very soon.

Third topic: innovation

“Innovation

What do Lego and Meccano have in common?

Everything has to be invented!

Innovation plays a key role in Alcan’s strategy.

In what sense does your coach’s job entail “innovation”? What role does it play? What purpose does it serve? …

NB: “innovation” does not only mean “new products”…But also new ideas, organizations, processes...”

My first reaction when I’ve read this topic was: I have no idea what to talk about. Obviously my coach has nothing to do with any technological invention; but can I even talk of innovation in processes, strategy?

If you’ve read some other posts I’ve written (for example the interviews), you already know that a specificity of M&A is that every deal is completely new, and that Dominique spends most of his time trying to solve problems that he couldn’t imagine before. (Otherwise, they wouldn’t be “problems”.)

That’s why there are no magic methods in M&A: there are guiding principles that define the rules of a deal (for example, about the documents you have to write, the content of the contract…); but most of them are legal things ­­- a field in which an M&A specialist cannot innovate, as much as I know.

So, what about innovation? What follows is the result of a conversation I had with Dominique – a conversation which made me sure that he was still the specialist. I’m afraid I still need a couple of other “Alcan days”.

The first idea is that since M&A is no science, you have to be very flexible and to innovate constantly. Every deal offers new difficulties and requires new ideas, depending on its purposes, on its complexity and on people involved in it. Take an example, the one you’ve already heard of (if you haven't, see this link): the divestiture of the aluminium tubes business. This was a peculiar one.

Alcan’s initial objective was to maximise value, and for that to have as many bids as possible. But the situation changed and it turned to an LMBO (*): the manager and his investor turned out to be the ones who offered the best price, and were also the best buyer because they had a good knowledge of the business. Talks were thus exclusive very soon, which is not common. The challenge for the M&A department was to adapt to this unexpected situation… getting to the expected result.

The second idea is that when you want to sell an activity, you have to prove innovative in the way you present it. A simple description is often not very attractive. When you sell a business, you sometimes have to write an “information memorandum”(*) or a “management presentation”. These documents follow some basic marketing rules: you have to prove that you meet the potential buyers’ demand. It’s common to do an attractive presentation of a product (it’s often called advertisement!); but when it’s about a whole business, you have to find new ideas and to be creative…

Second topic: international

If you want to know what does “international” mean in the everyday life of Alcan, if you haven’t yet, have a look at the repartition of Alcan’s activities all around the world (link: Alcan in the world); now, you and I understand why so many people at Alcan have to work with employees from different countries.

I say “have to”, but it’s not an unpleasant obligation. Most of us like to meet people from other countries: it’s a cliché, but that doesn’t mean it’s wrong. A right idea becomes a cliché if you say it a lot of times, whereas you can’t explain what its foundation is. That’s why I’ll try to give you a few reasons why I like “to meet people from different countries, different cultures”:

_ for my own knowledge, as I’m curious like most of you, I like to learn details about people and countries

_ sometimes I realize that you can solve problems by different ways of thinking than those I’ve learnt because of my Occidental / European/ French / Parisian culture…

_ in our generation, we often feel like European or even world citizens (even if it sounds naive!); it’s good to realize that it’s not only a feeling, that it’s a concrete part of us

Let’s be realistic! Not all of these reasons are valid if you want to say “I like working in a global company, because I’m in touch with a lot of people from different countries, different cultures”. If you have to call every day during a month a Swiss lawyer, because he’s the one helping you on one deal, you won’t necessary ask him : “what about your food habits in Switzerland? What is your opinion about Europe? Do you think that if I come one day to Basel, we could have a dinner together with our wives and speak about the good old days when we were dealing with that acquisition…?”

Of course, it depends on what kind of job you have. If your job is human-oriented (a random example: human resources!), you’ll ask this sort of questions because it’s a part of your job to better know people. But if your job is more “technical” (a random example: M&A), I think that there are two big reasons left to be interested in working in a international environment: first, it’s pleasant to speak different languages and to feel that your action has global consequences (ideally!); then, sometimes it’s interesting to compare different ways of solving a problem, or simply of analysing a situation.

Now let’s talk about my coach. How international is his job? Well, since the operations he has to deal with have to do with activities all around the world, Dominique always deals with people in foreign countries. See the example of Cebal: there are three plants, located in Saumur (France), Kolin (Czech Republic) and Cividate al Piano (Italy). A lot of phone calls I heard were in English; Dominique speaks English fluently, since he has lived in the UK and in the USA. Moreover, Dominique’s boss, whom I had lunch with, is a Canadian and speaks English – but he speaks French fluently.

You can see that for the languages, international means: English; but as I said, you can express very different things, and have many ideas of how to solve a problem, in a unique language. Dominique also travels for his job, for example, as I’m typing this, he’s in Montréal. His travels can also have a link with a deal in particular: he needs to meet a client, to see a plant that Alcan is buying…

Dominique’s comment:

- one could consider Alcan as a Canadian compagny (of course the HQ are in Montreal), a US company (the shareholders are US in majority, and they like the idea that Alcan is a «quasi» US company, quoted on the NYSE), or a French company (the largest nationality among the employees) So Alcan is really international (presence in 60+ countries pre spin-off of Novelis)!!

- even the M&A group is split between Montreal, Paris and Atlanta (and it's only about 10 people)

- the international network is what gives opportunities for motivated employees to work abroad, establish networks, etc. This is a huge advantage over smaller companies.

An example of divestiture

When I read my weblog and my presentation of the job, it seems to be that there is a lack of concrete; so I will give and explain you an example of operation that Dominique dealt with. In the beginning, I couldn’t talk about it because it was confidential. Now that it’s done, it is public information.

Here is an article that has come out a few days after my Alcan Day on all finance websites.

Alcan Sells Aluminum Tubes Business to Current Management and Investment Fund
2005/04/01

“  Montreal, Canada — Alcan Inc. (NYSE, TSX: AL) announced today the sale of its aluminum tubes business to its current management team and 21 Centrale Partners, an investment fund specialized in high-potential mid-size industrial companies. Details of the transaction were not disclosed. 

"This new entity will be a leader in the aluminum tubes business, with focused management and resources for its market," said Christel Bories, President and Chief Executive Officer, Alcan Packaging. "Alcan’s strategy is to further direct our investments on markets with better growth rates, such as our other tube businesses – plastic and laminate – which remain a core operation within Alcan Packaging’s Beauty Sector," she added.

The sale consists of three plants located in Saumur (France), Kolin (Czech Republic) and Cividate al Piano (Italy). The aluminum tubes business’ 780 employees will continue to work for the new entity, which will have annual sales of approximately US$85 million.

Alcan is a multinational, market-driven company and a global leader in aluminum and packaging, as well as aluminum recycling. With world-class operations in primary aluminum, fabricated aluminum as well as flexible and specialty packaging, aerospace applications, bauxite mining and alumina processing, today’s Alcan is well positioned to meet and exceed its customer's needs for innovative solutions and service. Alcan employs 70,000 people and has operating facilities in 55 countries and regions. ”

I was pleased to see this because I recognized this operation, a.k.a the “SCOUT project” ! I’ve heard a lot about it during my Alcan Day. I can even acknowledge that I’ve read this article, because Dominique had to validate it before it could come out. I know thus a few tools and details, that I can use in order to illustrate for you my coach’s job.

__ the clients: its current management team and 21 Centrale Partner. Oh, I know this, it’s an LMBO! The client is the management helped (financially) by an investment fund.

__ difficulties: when an entity is separate from the group, a lot of little details become difficulties.

_these three plants used to resort to several internal service providers of Alcan,  the lawyers;

_ the contracts with suppliers were integrated to global contracts of Alcan, since some outgoings are centralized ; and if my memory is good, the supplier of aluminum is Alcan itself… these contracts now need to be separated from the big one!

_ these plants did not only produce aluminum tubes, but also other tubes, that Alcan don’t necessary want to sale (and the current management to buy); this activity need consequently to be transferred.

_ you have to deal with social consequences: even if, as it’s written in the article, there will be no lay out because of this operation, you need to inform the trade unions and to have advice from them. You have to sort which information you will give them.

That’s what I can tell you about this deal. I was impressed, because Dominique has to deal with all these people (21 Central, the plants’ manager, the lawyer…) and when he hangs up with one, there’s another call. But there is not only one deal… during my Alcan  Day, my coach was dealing with four different operations; you can imagine that in each of them, dozens of little problems like these have to be solved.

My conclusion is that in order to work in M&A, your neurons and synapses have to be very efficient and rapid.

 

First topic: clients ans suppliers

First discussion topic: clients and suppliers.

« In the business chain, you can easily identify a company's clients and suppliers, but what about its employees'?
Each of them also has clients and suppliers? And we are not only talking about sellers and buyers!
Though it may seem unexpected, every job at Alcan has clients and suppliers! Who are those of your coach? What kind of relationship does your coach keep with his or her clients and suppliers? What are the major purposes for these relationships?? »

 

My point of view:

• As much as I know, Dominique’s clients are internal clients. The service he supplies is only for Alcan, since he deals with mergers, divestitures and acquisitions of some activities of Alcan. There are two aspects in the job: advice and execution; in both, the job is done for the different Business Groups. Given this, the clients are always the same: Alcan’s top executives… (1) Thus, the relationship that my coach has with them is interesting since it’s a hierarchical one, and is not the one you’re supposed to have with “clients”.

  You can see this from another point of view: the clients could be the firms that are sold or bought (2). In this case, every client is transitory, the relationship lasts a few months – but from this point of view, the relationship between them is more interesting:

  In some cases, the management of the firm that is sold/ bought have not the same interests as Alcan has. I already mentioned the “value-oriented” management of Alcan: Alcan’s (and Dominique’s) interest in, say, a divestiture, is to choose the most profitable offer. Actually, that’s not the only criteria; sometimes, they can decide to sell a business to someone who has offered a lower price, but who, they believe, can deliver a transaction more quickly or more effectively. But the manager of the plant that is sold (this is a fictitious example) would perhaps prefer a buyer with whom he has the best personal fit.

  Like every supplier, Dominique must deliver quality service to his clients. He must understand their needs and goals and is responsible for the good execution of the transaction.

• About Dominique’s suppliers, I’m lucky because I’ve heard several of them during my Alcan Day: first, I’ve met three internal services providers:

  Antoine de Corbière, an internal auditor (who also is a coach in the program): he supplies a lot of information on the businesses that are sold;

  Cyril Manoylovitch, tax expert: his job is to establish tax consequences for Alcan when a divestiture is made (capital tax gain or loss). He also reviews legal documentation when it relates to taxes and can assist in tax due diligence for acquisitions. Cyril is specifically overseeing the packaging sector.

  Jeremy Leach, corporate lawyer. His role in an M&A deal can be:

  _ to help drafting the due diligence report / confidentiality agreements, sale and purchase agreement (SPA) (*)

  _ to deal with the “conditions precedent” (*)

    …

  The relationship between these suppliers and my coach are often easy, since they are colleagues; and for the corporate lawyer has the same ultimate boss as Dominique has. This relationship is important, especially for the tax expert and the corporate lawyer: during a day and a half, I’ve met each of them once and heard a couple of phone calls between one of them and Dominique. He always needs advice from them, since M&A is very linked with law. That’s why it’s important, I guess, this function to be internal. They also use external lawyers / tax experts when internal resources are not available.

  I’ve also heard of several outer suppliers:

  As I said, for some complex deals, an investment bank can help coordinate an auction process in a sale (draft “information memorandum” (*)), be the main contact point of the potential buyers, and generally advise Alcan on all aspects of a deal.

  During my Alcan Day, I’ve heard a few phone calls with a company giving numerical services that was in charge to put a data room on a numerical support for the bidders of a divestiture.

  With these suppliers of course, the relationship is not the same and is more “normal” in my opinion, since Dominique has to negotiate the price and the supply with them: this is a really commercial relationship.

Dominique's comment:

1) first paragraph: Actually, that’s not totally right. This is no hierarchical relationship, since I don’t “report” anything to these people. My real boss is Tim, whom you’ve met. Of course, the top executives have an upper position than I have in the group, but it would be more accurate to say that I’m a consultant, specialized in M&A, whose role is to help them to see some mission through. By the way, usually, I deal with a lot of people who have a lower position.

(2) second paragraph: To be more precise, the client is the business group that decides to sell one of its activities (and not the activity itself).

Interviews

Now, let the experts talk!

  I’ve asked a few questions to Dominique Lannes and to Sebastien Danneaud (the one who is sitting), who also works in the M&A department. This double interview will allow you to have two points of view about the same job.

(for Sebastien's interview: I did the sum up and the translation, so if there is any mistake or simplification, it's all my fault...)

Describe your job.

D.L: We like to view M&A internally as a “strategic implementation tool”.  We provide a service to the business groups (our clients) by helping them executing acquisitions or divestitures that they plan in their strategic review.  When solicited, we also provide a contribution in the decision making process that leads to a divestiture.  Once a project has been assigned to M&A, we become responsible for the overall process and the successful negotiation of the transaction.  In this context, we are generally assisted by the key business groups people involved, lawyers, tax advisor, EH&S (Environment, Health & Safety) specialist, and some time investment banks.  Some of this assistance can be provided externally.

S.D: This is a job of internal advice about some operations. It has two aspects: upstream, we are consulted when a sector needs to buy or to sell an activity. But it’s its decision. Downstream, we do the negotiation: we prepare or check due diligences (*), agreements…; we also convey information about the operation inside the firm.

What do you spend most of your time on in a day (phone, computer, colleagues’ office…)?

D.L: I tend to travel where my deals lead me to (I am still waiting for an assignment in Hawai!), but it’s overall very reasonable. On average, I probably spend more time in the office than outside.  When in the office, I spend most of my time on the phone, writing emails or in meetings.

S.D:

When we deal with a divestiture, we spend a lot of time on the negotiation of the agreement, and on writing the due diligence (it can take 1 or 2 months). During the day, more generally, I spend most of my time in meetings and on my computer.

Why do you do this job in particular; I mean, a lot of students (I hope) are reading this, who want to know if they can fit to this job. Can you tell them about:

-         Good aspects of your job

D.L : Every day is different and has its share of surprises. No risk of getting bored! Meeting a lot of different people (both internally and externally). Each deal is different technically (structure, jurisdictions, contracts, etc.) and on the human side (new teams of people on the other side to negotiate with). The context is also very close to key decision makers within the Group (Business Group Heads, Executive Committee, etc.)

S.D: In this job, you are at the heart of every job's strategy.

-         Qualities and abilities required

D.L: Communication (oral and written), work capacity, flexibility, availability. Technical skills come mostly with experience

S.D: You have to want to be interested in different businesses; to be organized and have communication skills.

Can you do the same for students wondering if they prefer to work with, say, an industrial firm or a luxury firm?

D.L: I think it’s better to look at the people you are working with, than if the company sells jewels vs. plastic packaging.  Except for certain ethical reasons that one person may have in relation with certain businesses (e.g. tobacco, weapons manufacturing, etc.) I think students should focus on other aspects of a company. It can be just as fun to sell aerosol cans as it is to sell watches. The key thing for a junior is who he is working with and what does he learn.

S.D: In industry, the issues you have to deal with are often related to interesting and complex aspects: the global markets, geopolitics, social issues...

Why do you do M&A in a firm and no longer in a bank?

D.L: When you are doing M&A as an advisor, you are only the advisor. You don’t make decisions. You give advice to someone else who makes the decision. This can become frustrating. Also, you do not develop as deep/detailed a knowledge about M&A as you do when you run the deal as principal. In a bank, you often only get to see the major issues, but you don’t control the information.

S.D: In a bank, you are only an advisor. Often, the deals are "bigger"; but in a bank, from an external point of view, you have a "short term" vision of the stakes.

What is M&A? What does the job consist in?

Why this activity inside the firm?

M&A means Mergers and Acquisitions, or rather Mergers, Acquisitions and Divestitures. Alcan has very numerous activities all around the world (see http://www.alcan.com/web/publishing.nsf/Content/About+Alcan+-+Locations ); and, as the management of this firm is a value-based management (*), strategy can lead to some expansion (geographic or by product), or on the contrary to sell some activities, if these choices create more value.

There intervene Dominique and his team...

M&A is not really finance…

Structurally, as you can see it on these parts of the organizational chart (Download organizational_chart.doc ) (more information accessible on http://www.alcan.com/web/publishing.nsf/content/About+Alcan+-+Company+Structure ), M&A doesn’t belong to the finance department. It’s in the “legal ans mergers and acquisitions” department. And Dominique and his colleagues don’t feel they only do finance: see the first question of the interviews.

(* means that this word is defined in the glossary)

Glossary/ or : why I didn't regret having skipped my finance class on this day...

**NEW!!** Warranted equity value : simply put, it is the company's market capitalisation, i.e its share price times the number of shares outstanding.

Value-based management:  it is the management approach that maximizes the shareholder value. See this page to know more about it: challenge, performance and contribution.

Leverage /gearing : to finance a firm's assets, you can use either debt or equity capital; the leverage is the amount of debt used.

The gearing (in French: effet de levier) can be summed up in one sentence: the more debt you use, the more return you get. To know a bit more about it: Download Gearing.doc

LBO/ LMBO: a Leveraged Buy Out is an acquisition that is funded with a large part of debt, and whose buyer is a financial investor.

As the core job of the financial investor is to buy companies and not to run them, he still needs the competence of the current management. Given this, a Leveraged Management Buy Out gives the management an interest in the profits of the deal, so that they cooperate with the investor.

Due diligence: refers to the complete analysis of a business to assist a buyer in making decisions about the purchase. The usual application of the term is in “confirming that the financial and record keeping aspects of the business are as represented”. This process usually takes place after an offer has been made and accepted, but prior to closing. Examples could be review of corporate records, agreements, employment issues, insurance information and legal matters.

This term can also be applied to the seller evaluating the buyer: if the payment is deferred or contingent, the seller should investigate the buyer's business reputation, financial strength, credit history and plans for the business.

Loss carry forward: since the 1^st of January 2004, under some conditions (e.g, not to change your activity),  you can carry forward your losses indefinitely. I give an exemple rather than a definition:

at the end of the year N, a firm X has made a result of – 900 € (a loss)

            at the year of the year N+1, the result is + 1200 €.

If  I suppose that 30% of profits are taxed, the firm should pay 400 € taxes at the end of the year; but with this law, it only pays 30%(1200-900) = 100 €

Tax convention: a tax convention between two countries allows a firm, for example, not being taxed twice on the same transaction because of the simultaneous application of the tax legislation of the two contracting states.

Confidential agreement: when you sell an asset, there is a long process in which you choose your buyer. The “candidates” want to know as much as possible about the activity they will invest in; but often, this information they need is highly confidential - all the more since these candidates are often direct competitors of the seller. The more you progress in the process, the more confidential the information given is.

Thus you need confidential agreement to be sure that your competitors won’t use or sell this information.

Asset / security: assets are bought to increase the value of a firm or benefit the firm's operations.  A good way to think of an asset is as “something that can generate cash flow”. Whether it's a company owning a piece of manufacturing equipment or an individual owning a rental apartment, the point is that the asset is "something" that generates for the owner

A security is essentially a contract that can be assigned a value and traded.

Examples of a security include a note, stock, preferred share, bond, debenture, option, future, swap, right, warrant, or virtually any other financial asset