The words in the room.

Section 280E of the Internal Revenue Code, which disallows ordinary business deductions for businesses trafficking in Schedule I or II controlled substances. It raises effective tax rates for cannabis operators and lowers after-tax cash flow, and therefore value. As of April 2026, qualifying medical cannabis products were placed in Schedule III while adult-use remained in Schedule I.

An expense added back to reported profit when calculating SDE or adjusted EBITDA because a buyer would not incur it: owner perks, one-time costs, above-market owner salary. Every add-back must be documented, or a buyer's quality-of-earnings review will remove it.

See: SDE, Adjusted EBITDA, Quality of earnings

Earnings before interest, taxes, depreciation and amortization, normalized for non-recurring items and market-rate management compensation. The earnings base most buyers of companies with a management team use to price a deal.

A transaction in which the buyer purchases specific assets and assumes specific liabilities of the business rather than buying the legal entity. Common in smaller deals and where the buyer wants to leave liabilities behind. Tax treatment differs from an equity sale.

See: Equity sale

A threshold of losses a buyer must exceed before it can claim indemnification from the seller. Negotiated alongside the cap and the escrow.

Representation of the acquirer: defining criteria, sourcing targets including off-market companies, evaluating them, structuring an offer, and managing diligence and closing.

The maximum amount a seller can be required to pay under the indemnification provisions of a purchase agreement, usually a percentage of the price.

A transfer of ownership or effective control of a company. Many contracts, leases and licenses contain clauses triggered by it, and licensed industries require regulator approval of it.

See: Change of ownership approval

In licensed industries such as cannabis, the regulator's review and approval of new owners before a transaction can close. It sits inside the deal timeline and governs when and whether a deal closes.

Confidential Information Memorandum. The detailed document describing a company to approved buyers under NDA: history, operations, customers, financials, growth opportunities and reasons for sale. Preceded by an anonymous teaser.

See: Teaser, NDA

The completion of the transaction: definitive agreements signed, conditions satisfied, funds transferred, ownership changed. Any success fee is paid through the closing process.

A permissioned, secure online repository where diligence documents are shared with approved buyers. Access is granted per party and can be revoked.

Payments received for services not yet delivered, recorded as a liability. In software and subscription businesses it is both a liability the buyer assumes and evidence of the recurring revenue the buyer is paying for.

The buyer's investigation of the company after an LOI: financial, legal, tax, operational, commercial, technical and regulatory. Exit planning works through the same list in advance.

Contingent consideration paid after closing if the business hits defined targets over a set period. Its value depends on the metric, the period, the seller's control over the outcome and the protections against buyer interference.

See: Contingent consideration

Earnings before interest, taxes, depreciation and amortization. A proxy for operating cash flow used as the earnings base for valuation multiples in companies with a management team.

See: Adjusted EBITDA, SDE

The contract between a seller or buyer and its advisor setting scope, term, confidentiality and fees. Fee terms are private and never published on this site.

A transaction in which the buyer purchases the ownership interests of the legal entity, taking the company with all its assets, liabilities, contracts and licenses. Often required where a license is issued to the entity.

See: Asset sale

A portion of the purchase price held by a third party after closing to cover indemnification claims, released to the seller after a defined period if no claims are made.

See: Holdback

A period during which the seller agrees not to negotiate with other buyers, usually granted on signing an LOI. Its length is a negotiating point; a seller grants it deliberately, not by default.

The structured preparation of a company for sale twelve to thirty-six months in advance: financial normalization, owner-dependence reduction, contract cleanup, systems documentation and a valuation checkpoint.

Purchase price retained by the buyer rather than placed with a third party, released later subject to conditions. Functionally similar to escrow with less protection for the seller.

See: Escrow

The seller's obligation to compensate the buyer for losses arising from breaches of representations and warranties or specified matters. Limited by baskets, caps and survival periods.

Letter of Intent. A mostly non-binding document setting out the principal terms of a proposed transaction: price, structure, timing, exclusivity and conditions. Signing one starts due diligence.

See: Exclusivity

The factor applied to an earnings or revenue base to arrive at value. Determined by comparable transactions and buyer behavior in an industry and size range, then adjusted for the specific company's risk and growth.

Non-Disclosure Agreement. Executed by a buyer before receiving any information that could identify a company. In our process, no CIM moves without one on file.

Revenue from a customer cohort a year later, after churn and expansion, as a percentage of the starting revenue. Above one hundred percent means the base grows without new sales.

The agreed level of working capital the business must have at closing. If actual working capital is above the peg the price adjusts up; below, it adjusts down. Often the most under-negotiated number in a deal.

See: Working capital adjustment

The seller's agreement not to compete with the business for a period after closing within a defined scope and territory. Its terms are part of the value a buyer is paying for.

A company's profit restated the way a buyer will see it, after add-backs and adjustments for non-recurring items, related-party arrangements and accounting differences.

A company that is not publicly for sale and has not been marketed by an intermediary. Off-market deal flow comes from direct, confidential owner outreach.

Evidence that a buyer has the capital, or committed financing, to close. Required in our process before a buyer receives identifying information.

An independent review, usually commissioned by the buyer, that tests whether reported earnings are sustainable and accurately stated. It examines add-backs, revenue recognition, working capital and one-time items.

See: Add-back

Statements of fact the seller makes about the company in the purchase agreement. If untrue, they give rise to indemnification claims. Reps and warranties insurance can shift that risk to an insurer.

A portion of the seller's proceeds reinvested as equity in the buyer's entity. Upside if the buyer succeeds, illiquid until the buyer's own exit.

Seller's Discretionary Earnings. EBITDA plus one full-time owner's compensation and benefits, plus add-backs. The earnings base used for owner-operated companies. Higher than EBITDA for the same company, with correspondingly lower multiples.

See: EBITDA, Add-back

Representation of the seller in a transaction: readiness, valuation, marketing materials, buyer outreach under NDA, negotiation, diligence coordination and closing.

Financing the seller provides to the buyer as part of the price, repaid over time with interest. Its rate, term, security and subordination decide whether it is a bonus or a risk.

A fee payable to the advisor upon completion of a transaction, typically calculated on the transaction value and paid through the closing process. Terms are documented in the engagement agreement.

A short, anonymous summary of an opportunity sent to potential buyers before an NDA. It describes the business without identifying it.

The seller's agreed post-closing involvement: duration, role, compensation and scope. Often paired with a non-compete.

In cannabis and other licensed industries, any person or entity with an ownership, control or profit interest that a regulator requires to be disclosed and approved. Definitions and thresholds vary by state.

The post-closing true-up of the purchase price against the net working capital peg, based on the closing balance sheet.

See: Net working capital peg