A state of a company that typically has completed its seed stage and has a founding or core senior management team, has proven its concept or completed its beta test, has minimal revenues, and no positive earnings or cash flows.

Source: ILPA

Capital provided to a young or emerging company to facilitate its growth and development, as illustrated in Seed Financing and Start-up Financing.

Source: ILPA

Venture capital funds focused on investing in companies in the early stages of their lives.

Source: Invest Europe

Seed stage: A developing business entity that has not yet established commercial operations and needs financing for research and product development.

Start-up: A business in the earliest phase of established operations and needs capital for product development, initial marketing and other goals.

Other early stage: A firm that has begun initial marketing and related development and needs financing to achieve full commercial production and sales.

Source: ILPA

A provision which used to be commonplace but is now increasingly rare whereby the buyer of acompany agres to pay the seller a fixed multiple of the actual profits of each of the next two or three years. The alternative is often to try to get certain minimum levels of future profits made the subject of a warranty, but this is now very difficult to achieve except in the case of a forced sale or a classic traditional-style MBO.

Source: ILPA

European Banking Authority

Source: esma

Earnings before interest and tax

Source: IPEV

Earnings before interest, tax, and amortisation

Source: IPEV

ILPA: Earnings Before Interest, Taxes, Depreciation and Amortization: A measure of cash flow calculated as: Revenue - Expenses (excluding tax, interest, depreciation and amortization). EBITDA looks at the cash flow of a company. By not including interest, taxes, depreciation and amortization, we can clearly see the amount of money a company brings in. This is especially useful when one company is considering a takeover of another because the EBITDA would cover any loan payments needed to finance the takeover.

IPEV: Earnings before interest, tax, depreciation, and amortisation

Source: ILPA, IPEV

European Central Bank

Source: esma

Economic and Monetary Affairs Committee of the European Parliament

Source: esma

Economic principle that as the volume of production increases, the cost of producing each unit decreases.

Source: ILPA

European Economic Area

Source: esma

European Enforcers’ Co-ordination Sessions

Source: esma

Economic and Financial Committee

Source: esma

European Financial Reporting Advisory Group

Source: esma

European Insurance and Occupational Pensions Authority

Source: esma

An extremely concise presentation of an entrepreneur's idea, business model, company solution, marketing strategy, and competition delivered to potential investors. Should not last more than a few minutes, or the duration of an elevator ride.

Source: ILPA

European Market Infrastructure Regulation

Source: esma

Capital provided to facilitate the takeover of all or part of a business entity by employees or a labour organization.

Source: ILPA

A plan established by a company whereby a certain number of shares are reserved for purchase and issuance to key employees. Such shares usually vest over a certain period of time to serve as an incentive for employees to build long term value for the company.

Source: ILPA

A trust fund established by a company to purchase stock on behalf of employees.

Source: ILPA

Endowment : An investment fund established by a foundation, university or cultural institution providing capital donations for specific needs or to further a company’s operating process. They are generally structured so that the principal amount invested remains intact (for perpetuity, for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose).
Foundations : A non-profit organisation through which private wealth is distributed for the public good. It can either donate funds and support other organisations, or provide the sole source of funding for their own charitable activities.

Source:

A commercial company or business financed through debt and equity capital provided by debt holders and owners.

Source: IPEV

ILPA: The total value of a business, the price at which it may be sold. Can be thought of as earnings x PE ratio (or any of the other earnings measures x the appropriate multiple) or as equity value + debt.

IPEV: The Enterprise Value is the total value of the financial instruments representing ownership interests (equity) in a business entity plus the value of its debt or debt-related liabilities, minus any cash or cash equivalents available to meet those liabilities.

Source: ILPA, IPEV

ESG stands for the environmental, social and governance factors that can impact (the performance of) a portfolio company and/or an investment, including the GP itself. It is a phrase commonly used alongside responsible investment.

Source: Invest EUROPE

European Parliament

Source: esma

Ownership interest in a company, usually in the form of stock or stock options.

Source: ILPA

Option for private equity investors to purchase shares at a discount. Typically associated with mezzanine financings where a small number of shares or warrants are added to what is primarily a debt financing.

Source: ILPA

ILPA: ERISA shall mean the United States Employee Retirement Income Security Act of 1974, as amended, including the regulations promulgated there under.

Invest EUROPE : The US Employee Retirement Income Security Act of 1974, as amended.

Source: ILPA, Invest EUROPE

A test that is satisfied if the General Partner determines in its reasonable discretion that Persons that are "benefit plan investors" within the meaning of Section (f)(2) of the Final Regulation constitute or are expected to constitute at least 25 percent in interest of the Limited Partners. Note that the test is 25% of the interests of all the limited partners, which means 20% (+/-) in the partnership as a whole, taking into account the general partner's interest.

Source: ILPA

European Supervisory Authorities

Source: esma

European Securities Committee

Source: esma

European System of Central Banks

Source: esma

European System of Financial Supervision

Source: esma

European Securities and Markets Authority

Source: esma

European Systemic Risk Board

Source: esma

European Union

Source: esma

A generic term for a range of activity of interest to buyout and mezzanine funds. "Event" refers to the nature of the specific business objective that is the basis for financing, such as a Divestiture, Management Buyout and other buyout activity, Merger/Acquisition, Re-capitalization, Restructuring/Turnaround or Succession Plan.

Source: ILPA

This occurs when the company agrees to pay an employee's salary for a number of years, regardless of when termination occurs, the day after he or she is employed or 10 years after.

Source: ILPA

Before the fact.

Source: GIPS

After the fact.

Source: GIPS

The price at which an option or warrant can be exercised.

Source: ILPA

The strategic means by which a private equity fund liquidates its stake in a business and achieves optimal returns. There are multiple exit routes, including Acquisition, Company Buyback, Initial Public Offering, Secondary Purchase and Write-off.

Source: ILPA

A fund's intended method for liquidating its holdings while achieving the maximum possible return. These strategies depend on the exit climates including market conditions and industry trends. Exit strategies can include selling or distributing the portfolio company's shares after an initial public offering (IPO), a sale of the portfolio company or a recapitalization. Exiting climates: The conditions that influence the viability and attractiveness of various exit strategies.

Source: ILPA

The realisation of an investment made by a fund. This will normally take the form of a sale or flotation (IPO) of the portfolio company.

Source: Invest EUROPE

The means by which a private equity firm realizes a return on its investment. Private equity investors generally receive their principal returns via a capital gain on the sale or flotation of investments. Exit methods include a trade sale (most common), flotation on a stock exchange (common), a share repurchase by the company or its management or a refinancing of the business (least common). A Secondary purchase of the LP interest by another private equity firm is becoming an increasingly common phenomenon.

Source: ILPA

Capital provided to a company to facilitate its growth and development objectives.

Source: ILPA

The ratio of total pooled fund expenses to average net assets. The expense ratio should not reflect transaction costs.

Source: GIPS

Capital (cash or investments) that enters or exits a portfolio. Dividend and interest income payments are not considered external cash flows.

Source: GIPS

An assessment of value performed by an independent third party.

Source: GIPS