Learn The Lingo Of Private Equity Investing

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private equity glossary

Foundations A non-profit organization through which private wealth is distributed for the public good. It can either donate funds and support other organizations or provide the sole source of funding for their own charitable activities. Endowment An investment fund established by a foundation, university or cultural institution providing capital donations for specific needs private equity glossary or to further a company’s operating process. ); write-offs; repayment of preference share/loans; sale to another venture capitalist; sale to a financial institution. PitchBook is a financial technology company that provides data on the capital markets. A security that gives the holder the option to purchase a company’s stock at a predetermined price for a specified period.

The average private equity backed financing received for the selected criteria. Funds provided to a company to finance its acquisition of other companies or assets. Seed capital– the provision of very early stage finance to a company with a business venture or idea that has not yet been established. Capital is often provided before venture capitalists become involved.

Alternative Mutual Fund (alt Fund)

When an investor gives a mature company capital it can use to expand or restructure in exchange for equity . A private equity glossary fund-of-funds devotes all its time to evaluating fund managers, which usually leads to above-average returns.

The Post-Money Valuation is the equity value of a portfolio company including the round of financing. The total private equity backed financing received for the selected criteria. The total equity amount invested by the firm for the time period selected. Timber funds may purchase land with the intent of growing or selling trees for products private equity glossary once the trees reach a certain level of maturity. Distributions to a limited partner investor from a fund in the form of stock. Stock distributions are valued as of the date of the distribution by the general partner. Usually the first institutional venture capital round of financing provided to companies for use in product development.

A type of private equity investing that focuses on startups and early-stage companies with long-term, high-growth potential. The value of all remaining investments in a fund plus the value of all distributions relative to the amount limited partners have contributed to the fund. A type of divestiture that creates an independent company through the sale or distribution of new shares of an existing business or division of a company. When one limited partner sells its alternative investments to another limited partner.

private equity glossary

The date on which the company’s shares are offered at the initial public offering . The lowest amount raised for a group of funds in the selected time period. The median amount raised for a group of funds in the selected time period. The private equity glossary maximum equity amount invested by the firm during the time period selected. The highest amount raised for a group of funds in the selected time period. The sale or distribution of a company’s stock to the public for the first time.

Senior Debt

private equity glossary

The board will meet periodically but does not have any legal responsibilities in regard to the company. Acquisition finance– Companies often need to use external finance to fund an acquisition. This can be in the form of bank debt and/or equity, such as a share issue. Later-stage venture financing Financing provided for an operating company, which may or may not be profitable. Late stage venture tends to be financing into companies already backed by VCs. Start-up Funding provided to companies once the product or service is fully developed, to start mass production/distribution and to cover initial marketing. Companies may be in the process of being set up or may have been in business for a shorter time, but have not sold their product commercially yet.

It is determined by the businesses that the firm is in, and the operating leverage it maintains in these businesses. Can be computed from the regression beta (top-down) or by taking a weighted average of the betas of the different businesses (bottom-up). Economic exposure faced by a firm because of exchange rate movements which affect cash inflows and outflows on transactions entered into by the firm.

Mezzanine Financing

It is the result of an injection of capital, either through raising debt or equity. Mezzanine financing– This is the term associated with the middle layer of financing in leveraged buy-outs. In its simplest form, this is a type of loan private equity glossary finance that sits between equity and secured debt. Because the risk with mezzanine financing is higher than with senior debt, the interest charged by the provider will be higher than that charged by traditional lenders, such as banks.

Risk Tolerance

  • This means that the company has only recently been established, or is still in the process of being established – it needs capital to develop and to become profitable.
  • A venture capitalist will normally invest in a company when it is in an early stage of development.
  • Early-stage finance– This is the realm of the venture capital – as opposed to the private equity – firm.
  • But sometimes the firms will have multiple interimclosingseach time they have hit particular targets (first closings, second closings, etc.) and final closings.
  • The term cap is the maximum amount of capital a firm will accept in its fund.
  • Firms typically set a target when they begin raising the fund and ultimately announce that the fund has closed at such-and-such amount.

M&a Transactions And Management Liability:…

However, equity provision– through warrants or options – is sometimes incorporated into the deal. Lead investor– The firm or individual that organises a round of financing, and usually contributes the largest amount of capital to the deal. Capital gain– When an asset is sold for more than the initial purchase cost, the profit is known as the capital gain. This is the opposite to capital loss, which occurs when private equity glossary an asset is sold for less than the initial purchase price. Capital gain refers strictly to the gain achieved once an asset has been sold – an unrealised capital gain refers to an asset that could potentially produce a gain if it was sold. An investor will not necessarily receive the full value of the capital gain – capital gains are often taxed; the exact amount will depend on the specific tax regime.

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