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 ParliamentESMAILPAInvest EuropeInvestopedia, and IPEV).

Glossaire Vocabulaire Private Equity PE Cube

Terms by letter


All | # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
There are currently 29 names in this directory beginning with the letter 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
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
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
Balanced Fund
A private equity fund strategy whereby a wide range of investment targets is pursued, as distinct from a Specialized Fund.

Source: ILPA
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
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
BATNA (best alternative to a negotiated agreement
A no-agreement alternative reflecting the course of action a party to a negotiation will take if the proposed deal is not possible.

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
A point of reference against which the composite’s or pooled fund’s returns or risk are compared.

Source: GIPS
Benchmark description
General information regarding the investments, structure, and characteristics of the benchmark. The description must include the key features of the benchmark or the name of the benchmark for a readily recognized index or other point of reference.

Source: GIPS
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
Best Efforts
An offering in which the investment banker agrees to distribute as much of the offering as possible, and return any unsold shares to the issuer.

Source: ILPA
Blockage Factor
An adjustment that adds a discount or premia to the quoted price of a security because the normal daily trading volume, on the exchange where the security trades, is not sufficient to absorb the quantity held by the Fund. Blockage Factors are not permitted under US GAAP or IFRS.

Source: IPEV
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
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
Means of financing a small firm by employing highly creative ways of using and acquiring resources without raising equity from traditional sources or borrowing money from the bank.

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
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
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
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
Private individuals or firms retained by early-stage companies to raise funds for a finder's fee. (compare, broker-dealer)

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
Burn Out / Cram Down
Extraordinary dilution, by reason of a round of financing, of a non-participating investor's percentage ownership in the issuer.

Source: ILPA
Burn Rate
The rate at which a company expends net cash over a certain period, usually a month.

Source: ILPA
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
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
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
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
Buyout fund
Funds acquiring companies by purchasing majority or controlling stakes, financing the transaction through a mix of equity and debt.

Source: Invest Europe
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