Venture capital, private equity and M&A glossary

Venture Capital (VC):

Angel Investor: Individual who provides capital to startups in exchange for ownership equity.

Seed Funding: Initial capital used to start a business or launch a product.

Series A, B, C, etc.: Funding rounds in which a company raises capital from investors as it grows and develops.

Startup: Early-stage company in its infancy, typically seeking funding and growth opportunities.

Exit Strategy: Plan to allow investors to cash out their investment, usually through an IPO or acquisition.

Private Equity (PE):

Leveraged Buyout (LBO): Acquisition of a company using a significant amount of borrowed funds.

Portfolio Company: A company held within a private equity firm’s investment portfolio.

Fund of Funds (FoF): An investment strategy where a fund invests in multiple private equity funds.

Distressed Asset: An asset, typically a company, that is under financial distress or facing bankruptcy.

Management Buyout (MBO): Acquisition of a company by its existing management team.

Mergers and Acquisitions (M&A):

Merger: Combination of two or more companies to form a new entity.

Acquisition: One company buying another, often by purchasing a majority of its shares.

Due Diligence: Comprehensive investigation and analysis of a company’s financial, legal, and operational aspects before a transaction.

Synergy: The financial benefit achieved when two companies combine to create a stronger, more valuable entity.

Letter of Intent (LOI): A preliminary agreement outlining the terms and conditions of a potential deal.

Financial Terms:

Valuation: The estimated worth of a company based on various financial metrics and market conditions.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): A measure of a company’s financial performance, often used in valuations.

Return on Investment (ROI): A measure of the return generated from an investment, often expressed as a percentage.

Debt Financing: Raising capital by borrowing money, which the company must repay over time with interest.

Equity Financing: Raising capital by selling ownership shares in the company.

Last Updated on: 8th December 2023, 07:25 pm


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