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


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There are currently 50 names in this directory beginning with the letter F.
A procedure in which a firm can sell its accounts receivable invoices to a factoring firm, which pays a percentage of the invoices immediately, and the remainder (minus a service fee) when the accounts receivable are actually paid off by the firm's customers.

Source: ILPA
Fair Value
IPEV: Fair Value is the price that would be received to sell an asset in an Orderly Transaction between Market Participants given current market conditions at the Measurement Date.

GIPS: The amount at which an investment could be sold in an arm’s-length transaction between willing parties in an orderly transaction. The valuation must be determined using the objective, observable, unadjusted quoted market price for an identical investment in an active market on the measurement date, if available. In the absence of an objective, observable, unadjusted quoted market price for an identical investment in an active market on the measurement date, the valuation must represent the firm’s best estimate of the fair value. Fair value must include any accrued income.

Source: IPEV, GIPS
Family office
An entity that provides services to one or more affluent families, including investment management and other services (accounting, tax, financial and legal advice etc.).

Source: Invest Europe
Financial Accounting Standards Board

Source: esma
Financial Conglomerates Directive

Source: esma
Fee schedule
The firm’s current schedule of investment management fees or bundled fees appropriate to prospective clients or prospective investors.

Source: GIPS
Final Exit Date
The date and underlying holding has been sold or fully realized.

Source: ILPA
Final Regulation
An ERISA term, it is the United States Department of Labor's Final Regulation relating to the definition of "plan assets" in (29 C.F.R. ¤2510.3-101).

Source: ILPA
Financings and Investments
Each transaction involving a private equity fund or funds in a given portfolio company represents one round of financing. Each financing is made up of one or more investments, depending on the presence of co-investors. Financings are also known as deals.

Source: ILPA
A person who helps to arrange a transaction.

Source: ILPA
The entity defined for compliance with the GIPS standards.

Source: GIPS
First Close
An early close of part of a round financing upon the agreement of all parties. This is often used as part of a "Rolling closing" strategy.

Source: ILPA
First Refusal Rights
A negotiated obligation of the company or existing investors to offer shares to the company or other existing investors at fair market value or a previously negotiated price, prior to selling shares to new investors.

Source: ILPA
First-time Financing
See: New Investment

Source: ILPA
Fixed commitment
Having a predetermined amount of committed capital.

Source: esma
Fixed life
Having a predetermined, finite investment time horizon.

Source: GIPS
The act of buying shares in an IPO and selling them immediately for a profit. Brokerage firms underwriting new stock issues tend to discourage flipping, and will often try to allocate shares to investors who intend to hold on to the shares for some time. However, the temptation to flip a new issue once it has risen in price sharply is too irresistible for many investors who have been allocated shares in a hot issue.

Source: ILPA
When a firm's shares start trading on a formal stock exchange, such as the NASDAQ or the NYSE. This is probably the most profitable exit route for entrepreneurs and their financial backers.

Source: ILPA
Follow-on Financing
A supplementary round of financing in an existing Portfolio Company that builds on its original financing, generally in line with business growth and development. Venture-backed firms are often engaged in multiple follow-on deals.

Source: ILPA
Follow-on funding
Companies often require several rounds of funding. If a private equity firm has invested in a particular company in the past, and then provides additional funding at a later stage, this is known as 'follow-on funding'.

Source: ILPA
Follow-on Investment period
The period defined in the LPA whereby a fund can complete follow-on investments in underlying holdings.

Source: ILPA
Forced Buyback
Redemption of convertible debt, convertible preferred stock or common stock on pre-specified terms in situations where the company's value has not appreciated according to the agreed upon plan.

Source: ILPA
Forced Transaction
A Forced Transaction entails the involuntary sale of assets or securities to create liquidity in the event of an uncontrollable or unforeseen situation. Forced selling is normally carried out in reaction to an economic event, personal life change, company regulation, or legal order.

Source: IPEV
Foreign Investor
See: Investor Types

Source: ILPA
Form 10-K
This is the annual report that most reporting companies file with the Commission. It provides a comprehensive overview of the registrant's business. The report must be filed within 90 days after the end of the company's fiscal year.

Source: ILPA
Form 10-KSB
This is the annual report filed by reporting "small business issuers." It provides a comprehensive overview of the company's business, although its requirements call for slightly less detailed information than required by Form 10-K. The report must be filed within 90 days after the end of the company's fiscal year.

Source: ILPA
Form S-1
The form can be used to register securities for which no other form is authorized or prescribed, except securities of foreign governments or political sub-divisions thereof.

Source: ILPA
Form S-2
This is a simplified optional registration form that may be used by companies that have been required to report under the '34 Act for a minimum of three years and have timely filed all required reports during the 12 calendar months and any portion of the month immediately preceding the filing of the registration statement. Unlike Form S-1, it permits incorporation by reference from the company's annual report to stockholders (or annual report on Form 10-K) and periodic reports. Delivery of these incorporated documents as well as the prospectus to investors may be required.

Source: ILPA
Form SB-2
This form may be used by "small business issuers" to register securities to be sold for cash. This form requires less detailed information about the issuer's business than Form S-1.

Source: ILPA
Formation Date
The date a fund registers as a limited partnership.

Source: ILPA
Founder Vesting
A term imposed on founders of seed and early stage deals in which the founder ownership is subject to a vesting schedule with nothing up front and linear vesting over, typically, four years. The first twelve months ownership is often "cliff" vested after the first year with monthly vesting thereafter. For more mature companies, vesting credit can be applied at the time of investment. The purpose of this term is to protect investors from an early, unplanned exit by the founder and to provide investors with the equity necessary to attract a new management team.

Source: ILPA
Founders' Shares
Shares owned by a company's founders upon its establishment.

Source: ILPA
Free cash flow
The cash flow of a company available to service the capital structure of the firm. Typically measured as operating cash flow less capital expenditures and tax obligations.

Source: ILPA
Financial Stability Board

Source: esma
Financial Services Committee

Source: esma
Financial Stability Table

Source: esma
Full Ratchet Anti-dilution
The sale of a single share at a price less than the favored investors paid reduces the conversion price of the favored investors' convertible preferred stock "to the penny". For example, from $1.00 to 50 cents, regardless of the number of lower priced shares sold.

Source: ILPA
Fully Diluted Earnings Per Share
Earnings per share are expressed as if all outstanding convertible securities and warrants have been exercised.

Source: ILPA
Fully Diluted Outstanding Shares
The number of shares representing total company ownership, including common shares and current conversion or exercised value of the preferred shares, options, warrants, and other convertible securities.

Source: ILPA
Fund (Private Capital Fund)
ILPA: The pool of capital established for the purposes of private equity activity. Often a Management Company will be responsible for several funds that may vary according to mandate or investment period.

Invest EUROPE: Fund or private equity fund is the generic term used to refer to any designated pool of investment capital targeted at any stage of private equity investment from start-up to large buyout, including those held by corporate entities, limited partnerships and other investment vehicles, established with the intent to exit these investments within a certain timeframe. A closed-ended Limited Partnership is a common structure used for such a fund, but other legal forms are also used, e.g. FCPR, KG, SICAR, AB, BV and NV, etc.

IPEV: The Fund or Private Capital Fund is the generic term used in these Valuation Guidelines to refer to any designated pool of Investment capital targeted at all types and stages of Private Capital Investment from start-up to large buyout and including infrastructure and private credit Investment. It includes those pools held by corporate entities, limited partnerships, and other Investment vehicles. Institutional and retail investors provide the capital, which can be used, inter alia, to fund new technology, make acquisitions, expand working capital, and to bolster and solidify a balance sheet.

Source: ILPA, Invest EUROPE, IPEV
Fund Age
The age of a fund (in years) from its first takedown to the time an IRR is calculated.

Source: ILPA
Fund Commitment/Investment Commitment
A Limited partner's obligation to provide a certain amount of capital to a private equity fund for investments.

Source: ILPA
Fund documents
The entire set of legal documents, including the Limited Partnership Agreement (LPA) or equivalent legally binding document and side letters agreed by the investors and the fund manager. Matters covered in the legal documentation include the establishment of the fund, management, and winding up of the fund and the economic terms agreed between the investors and the fund manager.

Source: Invest EUROPE
Fund Focus
The indicated area of specialization of a venture capital fund usually expressed as Balanced, Seed and Early Stage, Later Stage, Mezzanine or Leveraged Buyout (LBO).

Source: ILPA
Fund Manager
ILPA : See: Management Company

IPEV : The Fund Manager is responsible for implementing a Fund’s investing strategy and managing its portfolio trading activities. The Fund Manager is also responsible for providing reporting data to the Fund’s investors.

Source: ILPA, IPEV
Fund of Funds
ILPA: A fund set up to distribute investments among a selection of private equity fund managers, who in turn invest the capital directly. Fund of funds are specialist private equity investors and have existing relationships with firms. They may be able to provide investors with a route to investing in particular funds that would otherwise be closed to them. Investing in fund of funds can also help spread the risk of investing in private equity because they invest the capital in a variety of funds.

Invest Europe: A private equity fund that primarily takes equity positions in other funds.

Europarl: A fund of funds (FOF) is an investment fund that invests in other funds with the main idea being that of tapping into the expertise of many managers and achieving maximum diversification. The concept is founded on the premise that not all investment managers are good in all markets and that not all managers are successful at all times. There are different types of 'fund of funds', each investing in a different type of collective investment scheme (typically one type per FoF), eg. hedge fund FoF, private equity FoF or investment trust FoF.

Source: ILPA, Invest Europe, Europarl
Fund Size
The total amount of capital committed by the investors of a venture capital fund.

Source: ILPA
ILPA: A professionally managed intermediary vehicle where-in individual and institutional investors allocate or pool assets for subsequent commitment to private equity funds.

IPEV: Fund-of-Funds is the generic term used in these Valuation Guidelines to refer to any designated pool of Investment capital targeted at Investment in underlying Private Capital Funds.

Source: ILPA, IPEV
The activity whereby a private equity fund seeks to raise new Capital Commitments from external sources of supply. In Canada, the most active fund-raisers are LSVCCs and Private-Independent Funds.

Source: ILPA
Fundraising and fundraising team
The process by which money is raised to create a fund. Funds are typically raised by a team of identified professionals within the GP that may include investor relations, fundraising and investment professionals (together, the “fundraising team”). The fundraising team may choose to work in conjunction with an intermediary (usually called a placement agent or placement adviser) particularly when looking to establish relationships with new LPs, as well as legal and other outside service providers.

Source: Invest EUROPE
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