Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

B

Balanced fund – a venture capital fund focused on both early-stage and development, with no particular concentration on either.

Buyout – Financing provided to acquire a company. It may use a significant amount of borrowed money to meet the cost of acquisition.

Buyout fund – a fund whose strategy is predominantly to acquire controlling stakes in established companies.

C

Captive funds – funds that are 100% owned by the parent organisation.

Corporate investor – Corporations that deliver nonfinancial products and services.

E

Early-stage fund – a venture capital fund focused on investing in companies in their primary development stage.

Endowment – an institution that is bestowed money (and possibly other assets) via a donation with the stipulation to invest it and use the gains for specific objectives so that the principal remains intact.

F

Family office – an office that provides investment management and other financial services to one or several families.

Foundations – a non-profit organization through which private wealth is contributed and distributed for public or charitable purposes.

Fund of funds – a private equity fund that primarily takes equity positions in other funds.

G

Generalist fund – a fund with either a stated focus of investing in all stages of venture capital and private equity investment, or with a broad area of investment activity.

Government agencies – Country, regional, governmental and European agencies or institutions for innovation and development (including structures such as the EBRD or EIF).

Growth – A type of private equity investment – most often a minority investment but not necessarily – in relatively mature companies that are looking for capital to expand operations, restructure operations or enter new markets.

Growth fund – a fund whose strategy is to invest in relatively mature companies that are looking for capital to expand or restructure operations.

I

Independent funds – semi-captive funds (those in which the parent owns less than 100%) as well as wholly independent funds.

Initial public offering (IPO) – The sale or distribution of a company’s shares to the public for the first time by listing the company on the stock exchange.

L

Later-stage financing – financing provided for the expansion of an operating company, which may or may not be breaking even or trading profitably. Later stage venture tends to finance companies already backed by venture capital firms.

Later-stage fund – a venture capital fund focused on investing in later-stage companies in need of expansion capital.

M

Mezzanine fund – a fund that provides (generally subordinated) debt to facilitate the financing of buyouts, frequently alongside a right to some of the equity upside.

O

Other asset manager – Financial institutions (other than bank, endowment, family office, foundation, insurance company or pension fund) managing a pool of capital by investing it across asset classes to generate financial returns.

P

Pension funds – a pension fund that is regulated under private or public sector law.

R

Repayment of principal loans – if a private equity firm provided loans or purchased preference shares in the company at the time of the investment, then their repayment according to the amortisation schedule represents a decrease of the financial claim of the firm into the company, and hence a divestment.

Repayment of silent partnership – a silent partnership is a type of mezzanine financing instrument. It is similar to a long-term bank loan but, in contrast to a loan, a silent partnership is subject to a subordination clause, so that in the event of insolvency all other creditors are paid before the silent partner. The company has to repay the partnership and has to pay interest and possibly a profit-related compensation. The subordination clause gives the capital the status of equity despite its loan character. This financing instrument is frequently used in Germany.

Replacement Capital – The purchase of a minority stake of existing shares in a company from another private equity firm or from another shareholder or shareholders.

Rescue / Turnaround – Financing made available to an existing business, which has experienced trading difficulties, with a view to re-establishing prosperity.

S

Sale of quoted equity – the sale of quoted shares only if connected to a former private equity investment, e.g. sale of quoted shares after a lock-up period.

Sale to another private equity firm – The sale of company shares to another direct private equity firm.

Sale to financial institution – The sale of company shares to banks, insurance companies, pension funds, endowments, foundations and other asset managers other than private equity firms.

Seed – financing provided to research, assess and develop an initial concept before a business has reached the start-up phase.

Sovereign wealth funds – State-owned investment fund managing a pool of money derived from a country’s reserves.

Start-up – financing provided to companies for product development and initial marketing. Companies may be in the process of being set up or may have been in business for a short time, but have not sold their product commercially.

T

Trade sale – The sale of company shares to industrial investors.

W

Write-off – The total or partial write-down of a portfolio company’s value to zero or a symbolic amount (sale for a nominal amount) with the consequent exit from the company or reduction of the shares owned. The value of the investment is eliminated and the return to investors is a full or partial loss.

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