Private Equity

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Bridge Financing Short-term financing used to bridge a gap in funding, often used in leveraged buyouts.

Capital Call A request by the general partner for limited partners to contribute additional capital to the fund.

Capital Structure The mix of debt and equity financing used by a company to fund its operations.

Carried Interest A share of the profits earned by the general partner, typically a percentage of the fund’s profits above a certain predefined hurdle rate.

Co-Investment The opportunity for limited partners to invest directly alongside the private equity fund in specific deals.

Co-Investment Vehicle An entity established to facilitate co-investment opportunities for limited partners.

Control Premium The additional value placed on a company when an investor acquires a controlling stake.

Distressed Debt Debt issued by companies that are experiencing financial difficulties.

Divestment The process of selling or disposing of assets or investments.

Dry Powder The amount of capital available to a private equity firm for investment.

Dry Powder Overhang The amount of committed but uninvested capital in a private equity fund.

Due Diligence The process of conducting thorough research and analysis on a potential investment opportunity.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) A measure of a company’s operating performance.

ESG (Environmental, Social, and Governance) Factors used to evaluate the sustainability and ethical impact of an investment.

Exit Strategy A plan for the eventual sale or disposal of an investment.

First Close The initial closing of a private equity fund after reaching a certain fundraising milestone.

Fund Life The period during which a private equity fund is actively investing and managing its portfolio before liquidating.

Fund of Fund (FoF) A private equity fund that invests in other private equity funds rather than directly investing in companies.

Fundraising The process of raising capital from limited partners for a private equity fund.

General Partner (GP) The firm responsible for managing a private equity fund.

Holding Period The length of time a private equity firm holds an investment before selling it.

Investor Relations The function of managing communications and relationships with limited partners and other investors.

IRR (Internal Rate of Return) A metric used to measure the profitability of an investment.

Key Man Clause A provision in a limited partnership agreement that allows limited partners to withdraw or renegotiate terms if certain key individuals leave the general partner.

Key Performance Indicator (KPIs) Metrics used to evaluate the performance of a company or investment.

Leveraged Buyout (LBO) The acquisition of a company using a significant amount of borrowed money to fund the purchase.

Limited Partner (LP) An investor who commits capital to a private equity fund and is not involved in the day-to-day operations of the fund.

Management Buyout (MBO) The acquisition of a company by its existing management team.

Management Fee An annual fee charged by the general partner to cover the costs of managing the fund.

Mezzanine Financing A hybrid form of financing that combines debt and equity, often used to fund expansion or acquisitions.

Minority Buyout The acquisition of a controlling stake in a company without buying out all existing shareholders.

Minority Stake An ownership position that represents less than 50% of a company’s shares.

Pitch Book A presentation or document prepared by an investment bank or private equity firm to showcase investment opportunities to potential investors.

Portfolio Company A company in which a private equity firm has made an investment.

Pre-money Valuation The value of a company or investment before new capital is invested.

Private Equity An asset class consisting of equity ownership in private companies or public companies that will be taken private.

Public Offering The sale of securities to the public, often through an IPO (Initial Public Offering).

Public-to-Private (P2P) The process of taking a publicly listed company private.

Recapitalization The restructuring of a company’s capital structure, often involving the issuance of new debt or equity.

Recapitalization Event A significant event or transaction that changes the capital structure of a company.

Reverse Takeover (RTO) The acquisition of a public company by a private company, resulting in the private company becoming publicly traded.

Risk-Adjusted Return A measure of return that takes into account the level of risk associated with an investment.

Roll-up Strategy The consolidation of multiple smaller companies within the same industry to achieve economies of scale or other benefits.

Secondary Direct The purchase of an existing private equity investment directly from the original investor.

Secondary Market A market where existing private equity investments can be bought and sold.

Secondary Purchase The acquisition of an existing limited partner’s interest in a private equity fund.

Shareholder Value The value created for the shareholders of a company through the increase in its stock price or dividend payments.

Sponsor A private equity firm that leads and manages an investment.

Valuation The process of determining the worth or value of a company or investment.

Venture Capital A subset of private equity focused on early-stage, high-growth companies.