The Private Equity dictionary

PE - Private Equity (Capital Investment)

LP: Limited Partner - Investor in an investment fund

GP: General Partner - Manager of an investment fund

TRI: Internal rate of return

AUM: Assets under management

LBO: LBO

Mergers and acquisitions: Mergers and Acquisitions

PIPE: Private investment in public capital

ROIC: Return of invested capital

ROI: Return on investment

DCF: Discounted cash flows

EV: Business value including net debt

IRR Hurdle: The minimum rate of return required for an investment to be considered successful

MoM: Multiple on money invested

NDA: Non-disclosure agreement

LOI: Letter of intent

PSA (purchase and sale agreement): Purchase and sale contract

NEV: Net asset

EBITDA: Profit before interest, taxes, depreciation and depreciation

EBIT - Profit before interest and taxes

EBITDA margin: The percentage of turnover represented by EBITDA

MPC - Private Placement Memorandum

PEG ratio - price-to-searching-to-growth ratio

Diversification - The process of allocating investment in different asset classes

Growth Equity - A type of risk-based investment focused on growth-enhancing enterprises

Mezzanine debt - A type of debt financing that combines debt and equity elements

Recapitalisation - The process of restructuring the capital structure of a company

Secondary Market - A market where the existing shares of a company are bought and sold

Senior debt - A type of debt financing that has priority over other types of debt

Subordinated debt - A type of debt financing that is contingent on other types of debt

Venture capital - A type of private equity investment focused on start-ups

CAGR: Compound annual growth rate

Rollover Equity: Capital that is transferred from former homeowners to new homeowners under a private equity agreement

Working Capital: The difference between current and current liabilities of an enterprise

Debt ratio: A ratio that measures a company's debt

Debt service coverage ratio: A ratio that measures a company's ability to service its debt

CapEx: Capital expenditure

Distributions: Payments to investors from fund returns

Hurdle Rate: The minimum rate of return that a fund must reach before profits are shared with investors

Carry: The percentage of profits a GP receives from a fund's returns

Dilution: Reducing the percentage of an individual's ownership in a business

Funds: A pool of money used to invest

Co-investment: An investment made alongside a private equity fund

Control premium: The additional value granted to a company when an investor takes control of it

Acquisition by management - The process by which a company's management team buys the company

Management costs - Fees paid to the GP for the management of a private equity fund.

IPO - IPO

P/E - Price-to-earnings ratio

NIV - Net asset

BPA - Benefits per share

ROE - Return on equity

DCF - Discounted cash flows

CAGR - Compound annual growth rate

Asset allocation - The process of diversification of investments in different asset classes

Fundamental analysis - The process of analysing the financial and economic fundamentals of a company

Technical analysis - The process of analysis of securities based on historical price and volume data

Dividend - Part of a company's profits paid to shareholders

Redemption of shares - Acquisition of its own shares by a company

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