Investment in Private Capital: Equity & Debt Flashcards
What is a “Leveraged Buyout”?
An acquirer (typically an investment fund specializing in LBOs) uses a significant amount of debt to finance the acquisition of a target and then pursues restructuring actions, with the goal of exiting the target with a sale or public listing.
What is “Management Buy-In”
A type of leveraged buyout (LBO) where the current management team is replaced with the acquiring team involved in managing the company.
What are “Portfolio Companies”?
The individual companies owned by a private equity firm.
What is “Mezzanine-stage Financing”?
Mezzanine venture capital that prepares a company to go public as it continues to expand capacity and enhance its growth trajectory.
It represents bridge financing needed to find a private firm until it can execute an IPO or be sold.
What is a PIPE (Private Investment in Public Company)?
A private offering to select investors with fewer disclosures and lower transaction costs that allows the issuer to raise capital more quickly and cost effectively.
What is a “Trade Sale”?
A portion or division of a private company sold via either a direct sale or auction to a strategic buyer interested in increasing the scale and scope of an existing business.
What is a “Direct Listing”?
Where the equity of a security is floated on (i.e., issued to) the public markets directly, without underwriters, reducing the complexity and cost of the transaction.
What is a “Special Purpose Acquisition Company”?
A “blank check” company that exists solely for the purpose of acquiring an unspecified private company within a predetermined period or it must return capital to investors.
What is a “Stockholder Overhang”?
The downward pressure on the share price of stock as large blocks of shares are being sold on the open market.
What is “Recapitalization”?
Recapitalization via private equity describes the steps a firm takes to increase or introduce leverage to its portfolio company and pay itself a dividend out of a new capital structure.
What is a “Secondary Sale”?
A sale of a private company stake to another private equity firm or group of financial buyers.
What is a “Write-off” or “Liquidation”?
Refers to a transaction that has not gone well, and the investment is likely going to lose value.
The private equity firm revises the value of its investment downward or liquidates the portfolio company.
What is “Venture Debt”?
Private debt funding that provides venture capital backing to start-up or early-stage companies that may be generating little or negative cash flow.
What is “Direct Lending”?
Providing capital directly from private debt investors.
What is a “Leveraged Loan”?
When private-debt investor firms borrow money to make a direct loan to a borrower.
