Private Equity Investment: Glossary of Terms

🔰 Beginner Level (1-35)

1. Private Equity (PE) – Investing in private (non-public) companies.
2. Buyout – Acquiring a company, often with borrowed money.
3. Investment Fund – A pool of investor money used to buy companies.
4. Venture Capital (VC) – PE that funds startups and early-stage companies.
5. Portfolio Company – A business owned by a PE firm.
6. Exit Strategy – How investors plan to sell and profit.
7. Due Diligence – Research and analysis before an investment.
8. Liquidity – How easily an asset can be converted to cash.
9. Seed Funding – Initial capital for a start-up.
10. Angel Investor – Wealthy individuals who fund early-stage startups.
11. Capital Raising – Collecting funds from investors for investments.
12. Growth Equity – Investing in a growing company without full control.
13. General Partner (GP) – The firm managing a PE fund.
14. Limited Partner (LP) – Investors in a PE fund (e.g., pension funds).
15. Fund of Funds (FoF) – A fund investing in multiple PE funds.
16. Capital Call – When a PE fund asks investors to contribute funds.
17. Series A/B/C Funding – Different rounds of start-up financing.
18. SaaS (Software as a Service) – A common sector for PE investment.
19. IPO (Initial Public Offering) – When a private company goes public.
20. Merger – Two companies combining into one.
21. Acquisition – One company buying another.
22. Carried Interest (Carry) – PE firm’s share of investment profits.
23. Management Buyout (MBO) – Company executives buying their company.
24. Equity Stake – Ownership share in a company.
25. Minority Investment – Owning less than 50% of a company.
26. Majority Investment – Owning more than 50% of a company.
27. Debt Financing – Raising money by borrowing.
28. Equity Financing – Raising money by selling ownership.
29. Strategic Investor – An investor with industry expertise.
30. Financial Investor – An investor mainly focused on returns.
31. Bridge Loan – Short-term financing before long-term funding.
32. Dry Powder – Cash reserves held by a PE firm for future deals.
33. Asset Management – Managing investments for clients.
34. Syndication – Multiple investors teaming up for a deal.
35. Convertible Note – Debt that can be converted into equity.

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🟡 Intermediate Level (36-70)

36. Leveraged Buyout (LBO) – Using borrowed money to buy a company.
37. Enterprise Value (EV) – A company’s total value, including debt.
38. EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization.
39. Multiple Arbitrage – Buying low and selling high based on valuation multiples.
40. Distressed Investing – Buying struggling businesses at a discount.
41. PIPE Investment – Private Investment in Public Equity.
42. Secondary Buyout – A PE firm selling to another PE firm.
43. Recapitalization – Restructuring a company’s debt/equity.
44. Tuck-In Acquisition – Small acquisitions that fit into a larger company.
45. Platform Investment – A key company acquired to build a portfolio.
46. Roll-Up Strategy – Combining smaller companies into a larger one.
47. Club Deal – Multiple PE firms investing together.
48. Special Purpose Vehicle (SPV) – A separate entity created for a specific investment.
49. Staple Financing – Pre-arranged financing offered in a sale.
50. Covenant-Lite Loans – Loans with fewer restrictions.
51. Fund Vintage – The year a PE fund started investing.
52. Hurdle Rate – Minimum return before GPs earn carried interest.
53. J-Curve Effect – Early losses, followed by high returns in PE.
54. Co-Investment – LPs investing directly alongside a PE firm.
55. Earnout – Extra payment based on future performance.
56. Trade Sale – Selling a business to another company.
57. GP Stakes Investing – Investing in PE firms themselves.
58. NAV (Net Asset Value) – The total value of a fund’s assets.
59. IRR (Internal Rate of Return) – A key measure of investment performance.
60. MOIC (Multiple on Invested Capital) – Total return (e.g., 3x means tripled money).
61. Drag-Along Rights – Majority owners forcing minority owners to sell.
62. Tag-Along Rights – Minority owners joining a sale by majority owners.
63. Catch-Up Clause – Allows GPs to get more profits after LPs receive a certain return.
64. Waterfall Distribution – The order in which profits are shared among investors.
65. Primary Investment – Investing in a company directly.
66. Secondary Investment – Buying existing stakes in PE funds.
67. Down Round – A company raising funds at a lower valuation.
68. Unicorn – A start-up valued at over $1 billion.
69. Decacorn – A start-up valued at over $10 billion.
70. Zombie Fund – A PE fund that can’t raise new money or exit investments.

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🚀 Expert Level (71-100)

71. Special Situations Investing – Investing in unique, complex deals.
72. Growth Buyout – Combining LBO and growth equity strategies.
73. PIPE Deal – Private equity investment in a public company.
74. Leveraged Recap – Taking on debt to pay investors.
75. GP-Led Secondary – When a PE firm restructures a fund instead of selling.
76. Carve-Out – Buying a division of a larger company.
77. SPAC (Special Purpose Acquisition Company) – A blank-check company that acquires a private firm.
78. Turnaround Investing – Reviving struggling companies.
79. Mezzanine Financing – Hybrid debt/equity investment.
80. Preferred Equity – Ownership with priority over common equity.
81. Hockey Stick Growth – A start-up with rapid growth.
82. Overhang – Unused investor commitments in a fund.
83. Management Fee – A fee (usually 2%) paid to GPs for managing a fund.
84. Alpha Generation – Outperforming market benchmarks.
85. Beta – A measure of risk relative to the market.
86. Clawback Provision – GPs returning profits if early distributions were too high.
87. Side Letter – Special agreements between GPs and LPs.
88. Lock-Up Period – The time investors must keep money in a fund.
89. Cherry Picking – Selecting only the best investments for marketing purposes.
90. Anchor Investor – A major investor that attracts others.
91. Carry Catch-Up – GPs earning a higher share of profits after a certain threshold.
92. Bridge to Exit – Short-term funding to prepare for a sale.
93. Anti-Dilution Clause – Protection against share dilution.
94. Liquidation Preference – Determines payout order in case of a sale.
95. Redemption Rights – The right to sell shares back to the company.
96. Side Pocket – A fund structure for illiquid investments.
97. Tracking Stock – A stock reflecting a subsidiary’s performance.
98. NAV Waterfall – Prioritizing profit distribution based on asset values.
99. Unitranche Loan – Combining senior and junior debt into one loan.
100. Vulture Fund – A fund that buys distressed assets cheaply.