Private equity

private-equityequityPrivate equity investorprivate equity firmprivate equity investmentsprivate equity investorsprivateprivate equitiesprivate equity firmsprivate equity investment
Private equity typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded.wikipedia
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Venture capital

venture capitalistventure capitalistsventure capital firm
A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Common investment strategies in private equity include leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
Venture capital (VC) is a type of private equity, a form of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth (in terms of number of employees, annual revenue, or both).

Private equity firm

private equity firmsprivate equity groupprivate equity
A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor.
A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital, and growth capital.

Growth capital

growth equitygrowth capital firmeconomical growth
Common investment strategies in private equity include leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. A Private investment in public equity, or PIPEs, refer to a form of growth capital investment made into a publicly traded company.
Growth capital (also called expansion capital and growth equity) is a type of private equity investment, usually a minority investment, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business.

Leveraged buyout

leveraged buyoutsLBOleveraged finance
Common investment strategies in private equity include leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
In addition to the amount of debt that can be used to fund leveraged buyouts, it is also important to understand the types of companies that private equity firms look for when considering leveraged buyouts.

Financial sponsor

financial buyerfinancial sponsor coverageprivate-equity firm
Leveraged buyouts involve a financial sponsor agreeing to an acquisition without itself committing all the capital required for the acquisition.
A financial sponsor is a private equity investment firm, particularly a private equity firm that engages in leveraged buyout transactions.

Platform company

Platform companies
Private equity firms view target companies as either Platform companies which have sufficient scale and a successful business model to act as a stand-alone entity, or as add-on / tuck-in / bolt-on acquisitions, which would include companies with insufficient scale or other deficits.
A platform company is a company that a Private equity group (PEG) views—when investing through acquisition in a new industry or market space—as a starting point for follow-on acquisitions in the same area.

Distressed securities

distressed debtdistresseddistressed investing
Common investment strategies in private equity include leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
Other buyers include brokerage firms, mutual funds, private equity firms and specialized debt funds such as collateralized loan obligations.

Limited partnership

L.P.limited partnerlimited partners
Private equity typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded.
Private equity companies almost exclusively use a combination of general and limited partners for their investment funds.

Private equity fund

private equity fundsprivate equityBuyout fund
These transactions can involve the sale of private equity fund interests or portfolios of direct investments in privately held companies through the purchase of these investments from existing institutional investors.
A private equity fund is a collective investment scheme used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity.

Royalty fund

* Royalty fund: an investment that purchases a consistent revenue stream deriving from the payment of royalties.
A royalty fund is a category of private equity fund that specializes in purchasing consistent revenue streams deriving from the payment of royalties.

Bolt-on acquisition

bolt-on acquisitions
Private equity firms view target companies as either Platform companies which have sufficient scale and a successful business model to act as a stand-alone entity, or as add-on / tuck-in / bolt-on acquisitions, which would include companies with insufficient scale or other deficits.
Private equity firms support such smaller and strategic acquisitions in order to increase the value of the acquiring company prior to sale.

Onex Corporation

Onex
Similar to the approach employed in the McLean transaction, the use of publicly traded holding companies as investment vehicles to acquire portfolios of investments in corporate assets was a relatively new trend in the 1960s popularized by the likes of Warren Buffett (Berkshire Hathaway) and Victor Posner (DWG Corporation) and later adopted by Nelson Peltz (Triarc), Saul Steinberg (Reliance Insurance) and Gerry Schwartz (Onex Corporation).
Onex Corporation is a private equity and credit investor and manager founded in 1984.

Jerome Kohlberg Jr.

Jerome Kohlberg
The leveraged buyout boom of the 1980s was conceived by a number of corporate financiers, most notably Jerome Kohlberg Jr. and later his protégé Henry Kravis.
Jerome Kohlberg Jr. (July 10, 1925 – July 30, 2015) was an American businessman and early pioneer in the private equity and leveraged buyout industries founding private equity firm Kohlberg Kravis Roberts & Co. and later Kohlberg & Company.

Kohlberg Kravis Roberts

KKRKohlberg Kravis Roberts & Co.KKR & Co.
By 1976, tensions had built up between Bear Stearns and Kohlberg, Kravis and Roberts leading to their departure and the formation of Kohlberg Kravis Roberts in that year.
KKR & Co. Inc. (formerly known as Kohlberg Kravis Roberts & Co. and KKR & Co. L.P.) is a global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its strategic partners, hedge funds.

Debt

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Venture capital is most suitable for businesses with large up-front capital requirements which cannot be financed by cheaper alternatives such as debt.
Lenders that provide revenue-based financing work more closely with businesses than bank lenders, but take a more hands-off approach than private equity investors.

J curve

J-curveJ curve of revolutionsJ-curve effect
Secondaries also typically experience a different cash flow profile, diminishing the j-curve effect of investing in new private equity funds.
In private equity, the J curve is used to illustrate the historical tendency of private equity funds to deliver negative returns in early years and investment gains in the outlying years as the portfolios of companies mature.

Private investment in public equity

PIPEPIPE convertiblePIPE investment
A Private investment in public equity, or PIPEs, refer to a form of growth capital investment made into a publicly traded company.
For private equity investors, PIPEs tend to become increasingly attractive in markets where control investments are harder to execute.

Syndicated loan

loan syndicationsyndicated loanssyndication
The lenders (the people who put up the $9bn in the example) can insure against default by syndicating the loan to spread the risk, or by buying credit default swaps (CDSs) or selling collateralised debt obligations (CDOs) from/to other institutions (although this is no business of the private equity firm).
Most new acquisition-related loans are kicked off at a bank meeting at which potential lenders hear management and the sponsor group (if there is one) describe what the terms of the loan are and what transaction it backs.

Restructuring

corporate restructuringrestructuredrestructure
"Distressed-to-Control" or "Loan-to-Own" strategies where the investor acquires debt securities in the hopes of emerging from a corporate restructuring in control of the company's equity;
This approach became impractical in the 1990s with private equity increasing demand for highly leveraged capital structures that created the market in high-yield and mezzanine debt.

Institutional investor

institutional investorsinstitutionalInstitutional Investors Alpha
These transactions can involve the sale of private equity fund interests or portfolios of direct investments in privately held companies through the purchase of these investments from existing institutional investors.
Others like pension funds can predict long ahead when they will have to repay their investors allowing them to invest in less liquid assets such as private equities, hedge funds or commodities.

Internal rate of return

IRRannualized rate of returninternal rates of return
ARDC is credited with the first major venture capital success story when its 1957 investment of $70,000 in Digital Equipment Corporation (DEC) would be valued at over $355 million after the company's initial public offering in 1968 (representing a return of over 5,000 times on its investment and an annualized rate of return of 101%).
IRR is also used for private equity, from the limited partners' perspective, as a measure of the general partner's performance as investment manager.

Angel investor

angel investorsangel investmentbusiness angel
A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor.
Private equity

Equity (finance)

equityshareholders' equityequity capital
Private equity is, strictly speaking, a type of equity and one of the asset classes consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange.
Private equity

William E. Simon

William SimonBill SimonWilliam E. Simon Foundation
In January 1982, former United States Secretary of the Treasury William E. Simon and a group of investors acquired Gibson Greetings, a producer of greeting cards, for $80 million, of which only $1 million was rumored to have been contributed by the investors.
In 1990, he partnered with several investors to form Catterton-Simon Partners, a private equity firm focused on beverages and other consumer products, which today is known as Catterton Partners.

Mezzanine capital

mezzanine debtmezzaninemezzanine financing
Common investment strategies in private equity include leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
Private equity