Frequently asked questions (FAQ)
What is Venture Capital?
Venture capital is a board subcategory of private equity that refers to equity investments made, typically in less mature companies, for the launch, early development, or expansion of a business. Venture capital is often sub-divided by the stage of development of the company ranging from early stage capital used for the launch of start-up companies to late stage and growth capital that is often used to fund expansion of existing business that are generating revenue but may not yet be profitable or generating cash flow to fund future growth.
What is Growth Capital?
Growth capital refers to equity investments, most often minority investments, in more mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a major acquisition without a change of control of the business.
What is Leveraged buyout, LBO or Buyout?
Leveraged buyout, LBO or Buyout refers to a strategy of making equity investments as part of a transaction in which a company, business unit or business assets are acquired from the current shareholders typically with the use of financial leverage. The companies involved in these transactions are typically more mature and generate operating cash flows.
What is Distressed or Special situations?
Distressed or Special situations can refer to investments in equity or debt securities of a distressed company, or a company where value can be unlocked as a result of a one-time opportunity (e.g., a change in government regulations or market dislocation). These categories can refer to a number of strategies, some of which straddle the definition of private equity.
What is Real Estate?
Real Estate in the context of private equity this will typically refer to the riskier end of the investment spectrum including ”value added” and opportunity funds where the investment often more closely resemble leveraged buyouts that traditional real estate investment. Certain investors in private equity consider real estate to be a separate asset class.
What is Mezzanine capital?
Mezzanine capital refers to subordinated debt or preferred equity securities that often represents the most junior portion of a company’s capital structure that is senior to the company’s common equity.
What is Secondary investments?
Secondary investments refer to investments made in existing private equity assets including private equity fund interests or portfolios of direct investments in privately held companies through the purchase of these investments from existing institutional investors. Often these investments are structured similar to a fund of funds.
What is Infrastructure?
Investments in various public works (e.g., bridges, tunnels, toll roads, airports, public transportation and other public works) that are made typically as part of a privatization initiative on the part of a government entity.
What is Due Diligence?
Investing successfully in private equity at a fund or company level, involves thorough investigation. As a long-term investment, it is essential to review and analyze all aspects of the deal before signing. Capabilities of the management team, performance record, deal flow, investment strategy and legal, are examples of areas that are fully examined during the due diligence process.
What is recapitalization?
This refers to a change in the way a company is financed. It is the result of an injection of capital, either through raising debt or equity.