| Acquisition |
The establishment of control in one business entity by another,
often with the assistance of private equity. Third party acquisition is a
common Exit Mechanism for private equity
funds. |
| Acquisition
for Expansion Financing |
Capital provided to a company to finance its controlling interest
in another entity for growth purposes. See also: Stages
of Development. |
| Acronyms |
AC/BU - Acquisition or buyout.
BIO - Biotechnology.
C - Corporate fund.
COMM - Communications and networking.
COMP - Computer software.
CON - Consumer products and services.
ELEC - Electronics and semiconductors.
ES - Early stage.
EX - Expansion.
FI - Foreign investor.
G - Government fund.
INT - Internet specific.
IT - Information technology.
IN - Institutional investor.
LS - Life sciences.
LSVCC - Labour-sponsored venture capital corporation.
MAN - Manufacturing and processing.
MED - Medical/health related.
MIS - Miscellaneous sectors.
OT - Other (i.e. investor type, sector, stage of development).
PI - Private independent fund.
SE - Seed stage.
ST - Start-up.
TU - Turnaround.
VC - Venture capital.
|
| Agent |
A market intermediary that assists in the structuring of a private
equity transaction. |
| Angel
Investor |
A high net worth individual active in venture financing, typically
participating at an early stage of growth. Also known as an informal investor. |
| Average Company Financing |
The dollar value of total capital invested divided by the total
number of investee firms in a given period. See also: Size
of Financings. |
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|
| Balanced
Fund |
A private equity fund strategy whereby a wide range of investment
targets is pursued, as distinct from a Specialized Fund. |
| Bridge Financing |
Capital provided on a short-term basis to a company prior to
its going public or its next major private equity transaction. |
| 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. |
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| Capital
Available for Investment |
The total dollar value of Capital
Under Management less those resources that have already been
invested by a private equity fund. Also known as liquidity. In the case of
Labour-sponsored Venture Capital Corporations, reserves required
by statutes are not included in liquidity calculations. |
| Capital
Commitment |
Resources flowing from individual, institutional and other
external sources to private equity funds. |
| Capital Gains |
The proceeds obtained on the sale of assets. |
| Capital
Under Management |
The total dollar value of capital resources, both invested and
un-invested, in a private equity fund or market as a whole. |
| Cleantech |
An abbreviation of "clean technologies", cleantech refers to
energy and environmental technologies producing products or services that
improve operational performance, productivity, or efficiency while reducing
costs, inputs, energy consumption, waste, or pollution. |
| Co-investment |
Two or more investors in a given transaction. Also known as
syndication. The average rate of co-investment is the total number of
investments made in the total number of deals in a given period. |
| Company
Buyback |
The redemption of private stock by the management of a
Portfolio Company. This is a common Exit
Mechanism for private equity funds. |
| Corporate
Fund |
A private equity fund that is a division or subsidiary of a
financial or industrial corporation. See also: Investor
Types. |
| CPC |
The Capital Pool Company program is a corporate finance tool for
emerging companies offered through the TSX Venture Exchange. The CPC Program
pairs an eligible private company with a public Capital Pool Company which
serves as the vehicle for taking the private company public.
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| Deal |
See: Financings and Investments. |
| Disbursement |
The actual dollar amount flowing from a private equity fund or
funds to a company in a given transaction. |
| Divestiture
Financing |
Capital provided to a company to facilitate the sale of its
interest in a product, division or subsidiary to another business entity. |
| Due Diligence |
The process of assessing the business and financial viability of a
potential investment target, as well as the potential terms and conditions of
an investment agreement. |
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|
| Early Stage Financing |
Capital provided to a young or emerging company to facilitate its
growth and development, as illustrated in Seed Financing
and Start-up Financing. See also:
Stages of Development. |
| Employee Buyout Financing |
Capital provided to facilitate the takeover of all or part of a
business entity by employees or a labour organization. See also:
Event Transaction. |
| Event
Transaction |
A generic term for a range of activity of interest to buyout and
mezzanine funds. "Event" refers to the nature of the specific business
objective that is the basis for financing, such as a
Divestiture, Management Buyout
and other buyout activity, Merger/Acquisition,
Re-capitalization,
Restructuring/Turnaround or Succession
Plan. |
| Exit
Mechanism |
The strategic means by which a private equity fund liquidates its
stake in a business and achieves optimal returns. There are multiple exit
routes, including Acquisition,
Company Buyback, Initial Public Offering,
Secondary Purchase and
Write-off. |
| Expansion Financing |
Capital provided to a company to facilitate its growth and
development objectives. See also: Stages of
Development. |
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|
| 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. See also: Size of
Financings. |
| First-time Financing |
See: New Investment. |
| 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.
|
| Foreign Investor |
See: Investor Types |
| Fund |
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. |
| Fund Manager |
See: Management Company |
| Fund-of-Funds |
A professionally managed intermediary vehicle where-in individual
and institutional investors allocate or pool assets for subsequent commitment
to private equity funds. |
| Fund-raising |
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.
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| Government
Fund |
A government-owned private equity fund, usually organized through
a federal or provincial agency or crown corporation. See also:
Investor Types. |
| Gatekeeper |
A professional advisor or intermediary operating in the private
equity market on behalf of clients, such as institutional investors. |
| General Partner |
See: Limited Partnership. |
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|
| Holding Period |
The length of time an investor holds all or part of their interest
in a portfolio company. |
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|
| Informal Investor |
See: Angel Investor. |
| Initial Public
Offering (IPO) |
The sale or distribution of the privately-held stock of a
Portfolio Company on public markets for the first time. This is
a common Exit Mechanism for private equity
funds, especially venture capital funds. |
| Institutional
Investor |
Pension funds, insurance companies, endowments, charitable
foundations, mutual funds and other non-bank financial institutions that are
often key suppliers to private equity funds. In Canada, certain large
institutional investors also have in-house programs for direct market activity
(see: Investor Types). |
| Institutional Venture Capital |
The organized market for venture activity, based on an industry of
management firms and funds, as distinct from the informal investment market
(see: Angel Investors). Venture financing
has taken place in Canada for decades, but a core industry emerged for the
first time in the early 1980s.
|
| Internal rate of
return (IRR) |
The discount rate equating the present value of cash outflows with the present
value of cash inflows. |
| Investment |
See: Financings and Investments. |
| Investor
Types |
The key players in the private equity industry, based on
particular fund structures and sources of capital supply. In the United States,
private equity is dominated by Private-Independent
Funds, while Canadian activity is diversified across several
major groups.
-
Corporate funds
(C): Subsidiaries of financial or industrial corporations.
-
Government funds
(G): Agencies or crown corporations owned by government.
-
Institutional investors
(IN): Funds managed inside certain large institutions.
-
Retail Funds: Funds (e.g.,
LSVCCs, PVCCs) established with benefit of government tax credits to
individuals.
-
Private-Independent Funds
(PI): Funds structured on Limited Partnerships and related vehicles.
-
Foreign investors (FI): Non-resident private equity funds or corporations
active in Canada.
-
Other investors (OT): Investors with an interest in specific private equity
deals, but without a permanent market presence.
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|
| Labour-sponsored
Venture Capital Corporation (LSVCC) |
A professionally managed private equity fund that raises capital
on a retail basis from individual Canadians, with the assistance of federal and
provincial government tax credits. LSVCCs operate according to some legislative
specifications in most Canadian jurisdictions. See also: Investor
Types and Retail Funds. |
| Late Stage Financing |
See: Stages of Development. |
| Lead Investor |
The member of a private equity syndicate that leads other
co-investors into successful conclusion of a company financing. Reporting of
Lead Investor commenced in January 2004. |
| Leveraged Buyout (LBO) |
A substantially debt-weighted financing of an Acquisition. |
| Limited Partner |
See: Limited Partnership.
|
| Limited
Partnership (LP) |
A legal fund structure most frequently used by
Private-Independent Funds to raise capital from external
sources, such as institutional investors. The primary relationship in this
structure is the general partner (the fund manager) and the limited partner
(the capital source). |
| Liquidity |
See: Capital Available for
Investment. |
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| Management
Buyout Financing |
Capital provided to facilitate the takeover of all or part of a
business entity by a team of managers. |
| Management
Company |
The professional manager of a private equity fund or funds. |
| Market Capitalization |
The total dollar value of all of a company's outstanding shares.
It is calculated by multiplying the number of outstanding shares times the
current market share price and is often referred to as market cap. |
| Merger |
The strategic combination of one business entity with another,
often with the assistance of private equity. See also:
Event Transaction. |
| Mezzanine
Capital |
A specialized form of private equity, characterized chiefly by use
of Subordinated Debt, or preferred
stock with an equity kicker, to invest largely in the same realm of companies
and deals as buyout funds (see: Event Transaction,
Middle Market). |
| Middle
Market |
A generic term used to describe the universe of well-established,
and mostly private, companies in traditional sectors that form the demand side
of much buyout and mezzanine activity. |
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|
| New
Investment |
The original round of financing in a company. Venture-backed firms
typically receive further Follow-on Financing
as they grow and develop in portfolios. Also known as a first-time transaction. |
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| Other Investor |
See: Investor Types |
| Offering Size |
Total dollar amount raised through an IPO.
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| Preferred
Investment Range |
A private equity fund's preferred scope for making investments.
This varies by market segment, with many venture funds preferring ranges below
$10 million and many buyout/mezzanine funds preferring ranges between $10
million and $50 million or higher. See also: Size of
Financings.
|
| Provincial Venture Capital
Corporation (PVCC) |
A professionally managed private equity fund that raises capital
on a retail basis from individual Canadians, with the assistance of provincial
tax credits. At present, PVCCs operate according to some legislative
specifications in British Columbia and Quebec. See also: Investor
Types and Retail Fund. |
| Portfolio
Company |
A business entity that has secured at least one round of financing
from one or more private equity funds. Also known as an investee firm. |
| Private Equity |
The generic term for the private market reflecting all forms of
equity or quasi-equity investment. In a mature private equity universe, there
are generally three distinct market segments: Buyout
Capital, Mezzanine Capital
and Venture Capital. |
| Private-Independent
Fund |
A professionally managed private equity fund that raises capital
from external sources of supply, such as institutional investors. Most
private-independent funds utilize Limited
Partnerships and related vehicles. See also:
Investor Types. |
| Private Investment In Public Equity
(PIPE) |
A transaction in which accredited investors are allowed to
purchase stock in a public company through an exemption allowed by provincial
securities regulation. As a result of the exemption, there is less disclosure
required by these investors than for other more widely distributed issues, like
IPOs and secondary offerings.
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| Re-capitalization
Financing |
Capital provided for a significant overhaul of a company's
financial structure. See also: Event Transactions.
|
| Restructuring/
Turnaround Financing |
Capital provided to a established firm, usually in a traditional
sector, that is undergoing financial distress or a major re-organization, but
is perceived as having long-term commercial viability. See also:
Event Transactions. |
| Retail Fund |
A category of professionally managed private equity fund that
relies on tax-assisted retail fund-raising, composed essentially of
Labour-Sponsored Venture Capital Corporations and Provincial Venture Capital
Corporations. See also: Investor Types |
| Return |
See: Internal Rate of Return.
|
| RTO |
A private company strategy for gaining access to public markets
through takeover of a listed business entity.
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| Secondary
Purchase |
The sale of private or restricted holdings in a portfolio company
by one investor to another. |
| Seed
Financing |
Capital provided to facilitate commercialization of new product
concepts, often from laboratories, research centres or entrepreneurs. If
successful, a seed financing may result in a Start-up.
See also: Stages of Development. |
| Size
of Financings |
Transactions defined according to their respective sizes. In the
venture capital realm, there are four categories of deal size.
-
Very small deals: Less than $500,000.
-
Small deals: Less than $1 million.
-
Mid-sized deals: Between $1 million and $5 million.
-
Large deals: Greater than $5 million.
See also: Preferred Investment Range.
|
| Specialized
Fund |
A private equity fund strategy whereby the focus in on specific
investment targets (e.g., sectors, stages of development), as distinct from a
Balanced Fund. |
| Stages
of Development |
Critical points on the growth continuum for firms assisted by
venture capital and other types of private equity. Typically, a venture-backed
company receives cumulative rounds of financing to facilitate its progression
from one stage of development to the next.
-
Early Stages of Development
-
Seed stage: A developing business entity that has not yet established
commercial operations and needs financing for research and product development.
-
Start-up: A business in the earliest phase of established operations and needs
capital for product development, initial marketing and other goals.
-
Other early stage: A firm that has begun initial marketing and related
development and needs financing to achieve full commercial production and
sales.
-
Late Stages of Development
-
Expansion: An established or near-established company that needs capital to
expand its productive capacity, marketing and sales.
-
Acquistion/Buyout: An established or near-established firm that needs financing
to acquire all or a portion of another business entity for growth purposes,
such as an Acquisition for Expansion
Financing.
-
Turnaround: An established or near-established company that needs capital to
address a temporary situation of financial or operational distress.
-
Other stage: Includes Secondary Purchase,
or the sale of portfolio assets among investors, and working capital.
|
| Start-up
Financing |
Capital provided to facilitate the first-time establishment of a
legal company structure around a marketable product concept. See also:
Stages of Development. |
| Succession
Plan |
The basis for transfer of business ownership from one generation
of managers to the next, often with the assistance of private equity. |
| Subordinated
Debt |
A financial instrument with qualities of both debt and equity,
often used in transactions as an alternative, or complement to, pure equity.
See also: Mezzanine Financing.
|
| Syndication |
See: Co-investment. |
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| Turnaround Financing |
See: Restructuring/Turnaround Financing
and Stages Of Development. |
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| Valuation
Policy |
The method or guidelines used by a private equity fund to
determine the value of its portfolio assets.
|
| Venture
Capital |
A specialized form of private equity, characterized chiefly by
high-risk investment in new or young companies following a growth path (see:
Stages of Development) in technology and other value-added
sectors. |
| Vintage Year |
The year in which a private equity fund is first created. |
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| Write-off |
The write-down of a portfolio asset to the value of zero, with the
result that the private equity investor or investors go without proceeds upon
disposition. |
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