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Deal Terms

Industry Definitions

In this article


Become familiar with terms used throughout the deals process across asset classes, including venture capital and real estate.

General terms

AbandonedThe transaction has been terminated before completion.
Advisor - BuyerA firm that has provided investment advice, analysis, due diligence, or legal advice for a fee on behalf of the buyer.
Advisor - SellerA firm that has provided investment advice, analysis, due diligence, or legal advice for a fee on behalf of the seller.
AnnouncedThe deal has been agreed and announced, and is subject to regulatory filings and customary closing conditions before completion.
Announced DateThe date the deal was first announced by the portfolio company or investor.
BidThe buyers have submitted a bid for a target, and are awaiting a response.
Bid – FailedThe transaction has been terminated before completion or the offer was rejected by the seller.
BrokerageAn intermediary that advises on behalf of the sellers and/or buyers in a transaction.
Completion DateThe date the transaction was finalized and completed.
Deal DateThe date the transaction was fully finalized and completed, or alternatively, the date the transaction was agreed and announced where it is subject to regulatory filings and customary closing conditions before completion.
Debt Provider A bank or firm that has provided financing commitments and leverage for the transaction.
Financial AdvisorA firm that has provided investment advice, analysis, or due diligence to the parties involved in the transaction.
Legal AdvisorA firm that has provided legal advice to parties involved in the transaction.
Market Share PriceThe actual share price on the stock exchange at the time of the offer from the buyers.
Offer per ShareThe share price at which the buyers have acquired the company. This is relevant for public-to-private and PIPE investments. This will generally represent a premium to the market share price.
P/E Ratio (Price-Earnings Ratio)A valuation ratio of a company’s current share price compared to its per-share earnings.
Rejected A bid from a fund manager for a company has been rejected by the company management/shareholders.
RestructuringA transaction where significant modification is made to the debt, operations, or structure of a company/asset.
Total Assumed DebtThe asset’s pre-existing debt obligations taken on by the investor(s).
Total Deal SizeThe size of the transaction, including leverage.
Total Equity InvestedThe aggregate amount of equity involved in the transaction.
Total StakeThe aggregate total equity stake acquired by the investor(s) in the transaction.
Total Transactional DebtThe aggregate amount of leverage involved in the transaction.

Buyout and venture capital deals

Add-onA private equity- or venture capital-backed portfolio company acquires a smaller company, or the assets of another company. This is typically to consolidate market position, or acquire proprietary technologies from competitors, and often involves acquiring smaller rivals.
AngelAn initial stage of funding provided by angel investors, typically friends, relatives, or individual entrepreneurs.
BuyoutA leveraged acquisition where the private equity firm will typically acquire the whole, majority of, or a controlling stake in, a private company.
Expansion CapitalA later-stage venture capital round in 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.
GrantAn award of financial assistance, typically by a government, to an eligible grantee with no expectation that the funds will be paid back.
Growth CapitalAn equity investment in a private company, where a private equity firm typically acquires a non-controlling or minority stake with a view to providing capital to increase the expansion plans of the company.
MergerWhere a private equity or venture capital-backed company merges with another company to form a new entity.
PIPE (Private Investment in Public Equity)An investment made by a private equity or venture capital firm in a public company, which remains public post-investment.
Pre-IPOAn investment in a company that is set to complete its IPO in the near future, often at a discounted price relative to expected IPO pricing amount.
Public-to-PrivateWhere a company is bought from the stock exchange and de-listed by the private equity firm.
RecapitalizationAn investment that typically includes the restructuring of debt and equity, with a view to stabilizing the company’s capital structure.
Secondary Stock PurchaseWhere part or all of an investor’s stake in a venture capital-backed company is acquired directly from a shareholder/investor, rather than purchasing stock from the company.
SeedThe first stage of venture capital financing by a professional venture capital firm, typically a small investment in a very early-stage company that has usually not yet established commercial operations.
Series ASeries A preferred stock leads on from the Angel/Seed Stages, and is the first significant round of venture capital funding offered by a portfolio company to the venture capitalist. Series A preferred stock is convertible into common stock in certain cases such as an IPO or the sale of the company.
Series B, Series C, etc.A mid-stage second round of financing provided by venture capitalists. Successive rounds are then termed Series C, Series D, and so forth, each offering preferred stock typically once a company has accomplished certain milestones in developing its business.
UnspecifiedRound A venture capital financing round where the stage/series has not been disclosed.
Venture DebtA type of debt financing provided to venture capital-backed companies by a specialized financier to fund-working capital or capital expenses. Venture debt providers combine their loans with warrants or rights to purchase equity, to compensate for the higher risk of lending.


Infrastructure deals

Availability-based PPPA type of PPP, wherein the private entity delivers a public, social, or economic infrastructure project in return for regular government payments.
BrownfieldInvolves an existing asset or structure that requires improvements, repairs, or expansion. The infrastructure asset or structure is usually partially operational and may already be generating income.
Concession PeriodA pre-defined time frame within which the private entity/concessionaire is entitled to build, own, operate, and/or maintain a public, social, or economic infrastructure project.
Concession-based PPPA type of PPP, wherein the private entity is granted the right to build, own, operate, and/or maintain a project and generates revenue by charging a usage fee.
GreenfieldInvolves an asset or structure that does not currently exist and needs to be designed and constructed. Investors fund the building of the infrastructure asset as well as the maintenance after it is designed, built, and operational.
Secondary StageInvolves a fully operational asset or structure that requires no investment for development.


Buyout and venture capital exits

IPO (Initial Public Offering)A company is listed on the stock exchange. Also known as a flotation.
MergerA private equity firm sells a stake in one of its portfolio companies to another company as part of a merger of operations.
Private PlacementA private equity firm sells some/all of its shares in a publicly listed portfolio company.
RecapitalizationA portfolio company issues debt in order to pay a dividend to a private equity firm (dividend recap) or a portfolio company is sold as part of a recapitalization.
RestructuringA company restructures its debt, often leading to the investors ceding control of the company to the debt providers. Equivalent to Chapter 11 in US bankruptcy law.
Sale to GPA private equity-backed company is sold to another private equity/venture capital firm.
Sale to ManagementThe management team of the portfolio company buy it from the private equity firm.
Trade SaleThe portfolio company is sold to another company.
Write-offThe portfolio company discontinues operations and goes into liquidation, with the result that the private equity firm no longer has a stake in an operating entity. Equivalent to Chapter 7 in US bankruptcy law.


 

Private debt deals

Call ProtectionA protective provision prohibiting the issuer of the loan from calling back the loan for a period early in its life.
Cash SweepA stipulation that any free cash flow must be used to pay down the debt of the company.
Convertible DebtConverts into equity if the company’s effective sale price per share is over the conversion price that was set by the loan issuer.
Convertible Preferred StockPreferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares.
Interest Rate FloorAn interest rate floor is a derivative contract in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price.
LTV (Loan to Value)The loan amount a fund will lend to a company as a percentage of the value of the company.
Origination/Underwriting FeesA fee charged by a lender on entering into a loan agreement to cover the cost of processing the loan. Therefore, this fee takes into account the administration that goes into setting up the structure of the loan.


Real estate deals

Initial Capitalization Rate (Cap Rate)The rate of return on a real estate property based on the income that the property is expected to generate.
Cap rate = Net operating income / Current market value (sale price) of the asset.
Single Asset Deal A transaction involving the sale of a single building. Transactions involving business parks consisting of multiple buildings in one location are also considered single-asset transactions.
Portfolio DealA single transaction that involves the sale of multiple buildings.
Entity-Level DealA single transaction that involves the investment in or acquisition of an entity (e.g. a company or a REIT) to gain access to its real estate holdings, rather than acquiring the physical assets separately.


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