Glossary of terms
At PE Cube, we aim at offering more than a Private Equity software to our customers: we want to support you in every aspect of your daily activities.
In that sense, we share with you a Glossary on Private Equity terms.
You will find below all the relevant terms of the Private Equity industry, with their definitions, as provided by trusted sources (sources: Gips®, European Parliament, ESMA, ILPA, Invest Europe, Investopedia, and IPEV).
Terms by letter
PE CUBE Terms
There are currently 29 names in this directory beginning with the letter B.
B
B Round
A financing event whereby professional investors such as venture capitalists are sufficiently interested in a company to provide additional funds after the "A" round of financing. Subsequent rounds are called "C", "D", and so on.
Source: ILPA
Source: ILPA
Backtesting
The process of using the observed value of an Investment as implied by a sale, liquidity event (e.g. an IPO) or other material change in facts with respect to the Investment, related Investments, or the Enterprise, to assess the Fair Value estimated at an earlier Measurement Date (or Measurement Dates).
Source: IPEV
Source: IPEV
Balance Sheet
A condensed financial statement showing the nature and amount of a company's assets, liabilities, and capital on a given date.
Source: ILPA
Source: ILPA
Balanced Fund
A private equity fund strategy whereby a wide range of investment targets is pursued, as distinct from a Specialized Fund.
Source: ILPA
Source: ILPA
Bankruptcy
An inability to pay debts. Chapter 11 of the bankruptcy code deals with reorganization, which allows the debtor to remain in business and negotiate for a restructuring of debt.
Source: ILPA
Source: ILPA
Barbell Strategy
Investment strategy by limited partners that primarily make commitments to buyout firms on (1) the micro/small and (2) the large/mega ends of the market; while mostly eschewing the vast array of middle-market opportunities.
Source: ILPA
Source: ILPA
Bear Hug
An offer made directly to the Board of Directors of a target company. Usually made to increase the pressure on the target with the threat that a tender offer may follow.
Source: ILPA
Source: ILPA
Benchmark
A point of reference against which the composite’s or pooled fund’s returns or risk are compared.
Source: GIPS
Source: GIPS
Benchmarking
Comparing returns of a portfolio to the returns of its peers; in private equity, fund performance is benchmarked against a sample of funds formed in the same vintage year with the same investment focus.
Source: ILPA
Source: ILPA
Blue Sky Laws
A common term that refers to laws passed by various states to protect the public against securities fraud. The term originated when a judge ruled that a stock had as much value as a patch of blue sky.
Source: ILPA
Source: ILPA
Book Value
Book value of a stock is determined from a company's balance sheet by adding all current and fixed assets and then deducting all debts, other liabilities and the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share.
Source: ILPA
Source: ILPA
Break Up Fee
Requires the party responsible for a break-up in an acquisition to pay the other party a negotiated amount of liquidated damages.
Source: ILPA
Source: ILPA
Bridge Financing
Capital provided on a short-term basis to a company prior to its going public or its next major private equity transaction. A limited amount of equity or short-term debt financing typically raised within 6-18 months of an anticipated public offering or private placement meant to "bridge" a company to the next round of financing.
Source: ILPA
Source: ILPA
Broad distribution pooled fund
A pooled fund that is regulated under a framework that would permit the general public to purchase or hold the pooled fund’s shares and is not exclusively offered in one-on-one presentations.
Source: GIPS
Source: GIPS
Broad-Based Weighted Average Ratchet
A type of anti-dilution mechanism. A weighted average ratchet adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A's preferred stock is repriced to a weighed average of investor A's price and investor B's price. A broad-based ratchet uses all common stock outstanding on a fully diluted basis (including all convertible securities, warrants and options) in the denominator of the formula for determining the new weighed average price. Compare Narrow-Based Weighted Average ratchet and Chapter 2.9.4.d.ii of the Encyclopedia.
Source: ILPA
Source: ILPA
Brokers
Private individuals or firms retained by early-stage companies to raise funds for a finder's fee. (compare, broker-dealer)
Source: ILPA
Source: ILPA
Bundled fee
A type of bundled fee that can include any combination of investment management fees, transaction costs, custody fees, and administrative fees. All-in fees are typically offered in certain jurisdictions where asset management, brokerage, and custody services are offered by the same company.
Source: GIPS
Source: GIPS
Business Development Company (BDC)
A vehicle established by Congress to allow smaller, retail investors to participate in and benefit from investing in small private businesses as well as the revitalization of larger private companies.
Source: ILPA
Source: ILPA
Business Plan
A document that describes the entrepreneur's idea, the market problem, proposed solution, business and revenue models, marketing strategy, technology, company profile, competitive landscape, as well as financial data for coming years. The business plan opens with a brief executive summary, most probably the most important element of the document due to the time constraints of venture capital funds and angels.
Source: ILPA
Source: ILPA
Buyout
Financing provided to acquire a company. It may use a significant amount of borrowed capital to meet the cost of acquisition. Typically by purchasing majority or controlling stakes.
Source: Invest Europe
Source: Invest Europe
Buyout Capital
A specialized form of private equity, characterized chiefly by risk investment in established private or publicly listed firms that are undergoing a fundamental change in operations or strategy (see: Event Transaction, Middle Market). Buyout funds are often called such, even if their mandates are not exclusively buyout-related.
Source: ILPA
Source: ILPA
Buyout fund
Funds acquiring companies by purchasing majority or controlling stakes, financing the transaction through a mix of equity and debt.
Source: Invest Europe
Source: Invest Europe
