Glossary

Here you can find a list of the most used terms in private equity, venture capital and private debt market.
AIFI
AIFI is the Italian Private Equity, Venture Capital and Private Debt Association, which since 1986 brings together institutional investors in risk capital present in Italy. In addition to representing its associates, AIFI plays an important role in spreading to the companies, the culture of risk capital and the opportunities associated with it. If you need more information or details on the operators associated with AIFI, you can consult the website of the Association at www.aifi.it.
Equity
In finance and accounting, equity is the value attributable to the owners of a business. The book value of equity is calculated as the difference between assets and liabilities on the company’s balance sheet, while the market value of equity is based on the current share price (if public) or a value that is determined by investors or valuation professionals.
Deal
Investment done by an investor in risk capital.
Commercial Paper
Unsecured, short-term debt instrument usually not backed by any form of collateral.
Loan
Medium or long term financial instrument different from bonds.
Bond
Debt instrument that represents a written and signed promise to pay a certain sum of money on a certain date.
Private debt fund
Fund focused on debt instruments issued by companies, such as bonds, commercial papers, other debt instruments and also loans.
Strumento ibrido
Instruments that combines the attributes of an equity security with a debt security (examples are convertible bonds).
Private debt
Provision of debt capital by financial investors over the medium or long term
Buy Out
Acquisition of a company by a private equity player and the operating (MBO) or an external group of managers (MBI). The financial technique often includes the use of a significant amount of debt.
Capital gain
Difference between the purchase price of a participation and the amount realized after the exit. It represents the return of the investment for an investor in the private equity sector.
Divestment
Partial or total sale of the investment held by an investor, at the end of an investment transaction, once the objectives of value creation within the company owned has been achieved.
Early Stage
Financing provided to a company in the earliest stage of its life. It includes seed and start up financing.
Exit
Generic terms which describe the divestment.
Expansion
Financing provided for the growth and expansion of an operating company, which may or may not be breaking even or trading profitably.
Follow on
Additional investment in a company already invested by the same or another private equity firm.
Closed-end fund
Actively managed fund that raises capital from institutional investors (banks, insurance companies, pension funds, etc.), and private ones in order to invest in companies not listed on the stock exchange.
Initial Public Offering (IPO)
Sale of a company’s shares to the public for the first time.
Captive player
Funds or investment companies totally owned by the parent organisation, which provides capital for the investments.
Independent investor
Funds or investment companies that raise capital from the market, typically from institutional investors.
Investment company
Private equity player different from closed-end funds mainly focused on Italy. From 2011, this definition replaces “country fund”.
IRR (Internal Rate of Return)
The annual compound return on an investment calculated on the basis of cash inflows and outflows.
Large deal
Equity investment with an amount between 150 and 300 million euro.
Mega deal
Equity investment with amount higher than 300 million euro.
Private equity
Provision of equity capital by financial investors – over the medium or long term – to non-listed companies with high growth potential.
Replacement
Purchase of existing shares in a company from another private equity investment organization or from another shareholder or shareholders.
Seed
Financing provided to research, assess and develop an initial concept before a business has reached the start up phase.
Startup
Financing provided to companies for product development and initial marketing.
Trade sale
Divestment through the sale of the company to a trade buyer.
Turnaround financing
Financing made available to existing business, which has experienced trading difficulties, in order to re-establishing prosperity.
Venture Capital
Financing provided to seed, start up and growth companies. Strictly speaking, it refers only to seed and start up investments.
Write off
Total or partial write-down of a portfolio company’s value to zero, with the consequent exit from the company or reduction of the share owned.