Smart Contract

A financial ecosystem built on blockchain technology that provides financial services — including lending, borrowing, trading, insurance, and asset management — without traditional intermediaries such as banks, brokerages, or exchanges. DeFi protocols use smart contracts to automate financial transactions and are typically open-source, permissionless, and composable.

The ecosystem of business models, partnerships, and revenue streams enabled by application programming interfaces that allow software systems to communicate and share data. APIs enable companies to monetise their data and functionality, create platform ecosystems, and embed services into third-party applications.

Digital intangible assets recorded and verified on a distributed ledger, including cryptocurrencies, tokenised securities, non-fungible tokens, and smart contracts. The valuation and accounting treatment of blockchain assets remain an evolving area, with significant implications for enterprise balance sheets.

A machine learning technique that trains models across multiple decentralised devices or servers holding local data, without transferring the raw data to a central location. Federated learning addresses data privacy and sovereignty concerns by keeping sensitive data on-device while still enabling collaborative model improvement.

A centralised platform for storing, managing, and serving the engineered features (input variables) used by machine learning models in both training and real-time inference. Feature stores ensure consistency between training and production environments, enable feature reuse across multiple ML models, reduce duplication of feature engineering effort, and provide a governance layer for tracking feature lineage and ownership.

A reduction applied to the value of a minority ownership interest to reflect the holder's inability to influence key business decisions such as dividend policy, asset sales, or management appointments. DLOC is the inverse of the control premium and is typically derived from observed control premium data in comparable transactions.

A branch of artificial intelligence concerned with enabling computers to understand, interpret, and generate human language. NLP powers applications such as chatbots, sentiment analysis, document classification, and automated contract review.

A specialist insurance product used in M&A transactions that covers the buyer against financial losses arising from breaches of the seller's warranties and representations in the sale and purchase agreement. W&I insurance has become standard in European PE transactions, enabling cleaner exits (as the seller's liability is capped or eliminated), facilitating auction processes, and allowing PE funds to distribute sale proceeds to LPs without retaining escrow reserves.

How is contingent consideration treated in a purchase price allocation?

Contingent consideration (earnouts) is measured at fair value on the acquisition date and included in the total purchase price. Changes in fair value post-acquisition are recognised in profit or loss.

How does ASC 805 differ from IFRS 3 in business combination accounting?

ASC 805 and IFRS 3 are broadly aligned on acquisition accounting, but differ on contingent consideration remeasurement, bargain purchase treatment, non-controlling interests measurement, and goodwill impairment testing.

What is an earnout and why do acquirers use them?

An earnout is contingent consideration in M&A where the seller receives additional payments if the acquired company hits post-close performance milestones (revenue, EBITDA, retention).