Glossary
Back office
The office or unit within a financial institution or private equity fund, which carries out support and administrative functions for the institution or fund. For private equity funds, back office activities cover amongst others the fund and management accounting, auditing, tax administration, reporting, and handling of capital calls and distributions.
Bad leaver
An employee who leaves the company within a short time or who is dismissed for cause, or under other circumstances where the employee is not permitted to retain the benefit of profit-sharing arrangements such as increased value of shares or carried interest.
Balanced fund
Venture capital funds focused on both early stage and development with no particular concentration on either.
Basis point
One hundredth of a percent (0.01%). Used to measure changes in or differences between yields or interest rates.
Beauty parade
An accepted mechanism for an investee company to select a provider of financial and professional services. The investee normally draws up a short list of potential providers, who are then invited to pitch for the business.
Benchmark
A previously agreed upon point of reference or milestone at which venture capital investors will determine whether or not to contribute additional funds to an investee company.
Best efforts underwriting
The most common form of underwriting agreement, in which the underwriter agrees to use its best efforts to place the offering with prospective investors, but is not committed to purchase any unsubscribed shares.
Beta
A statistical measure of a security’s volatility, compared to the overall market. A beta of less than 1 indicates lower volatility than the general market; a beta of 1 or more indicates higher volatility than the general market.See volatility.
BIMBO
Buyin-management-buyout. A combination of a management buyin (MBI) and a management buyout (MBO). In a BIMBO, an entrepreneurial manager or group of external managers financed by venture capitalists buys into a company and teams up with members of the target management team to run it as an independent business.
Black-Scholes Formula
A model developed by Fischer Black and Myron Scholes for pricing financial options.
Blank cheque preferred stock
Authorised preferred stock, the terms of which are left open under the company’s charter, thus allowing the board of directors to fix the terms without stockholder approval. Blank cheque preferred stock maybe used as an anti-takeover device.See anti-dilution provisions, poison pill, shark repellent.
Board of directors
Group of individuals elected by the shareholders of a company to promote and safeguard all aspects of the shareholders’ best interests.
Bond
A debt obligation, often secured by a mortgage on some property or asset of the issuer.
Book (or Syndicate Book)
A list of investors who have indicated an interest in purchasing shares in a public offering. The book is maintained by the lead managing underwriter during the offering process.See Hard circle.
Book manager
The lead managing underwriter who maintains the Book.
Book value per share
A company’s net worth (assets minus liabilities) divided by the number of shares outstanding. Tangible book value is the company’s net tangible worth (tangible assets minus liabilities) divided by the number of shares outstanding.
Bookbuilding
Process carried out in the period before a flotation in which the lead underwriter(s) invites institutional and retail investors to commit to subscribing to the floating company’s shares.See Book.
Bookrunner
The underwriter in charge of the bookbuilding process.
Break fee
A break fee (also referred to as an inducement fee) is a sum agreed between the offeror and the target company to be paid to the offeror by the target only if specified events occur which prevent the offer from proceeding or if the offer fails.
Break-even point
A point reached when a company’s revenue equals its expenses.
Bridge financing
Financing made available to a company in the period of transition from being privately owned to being publicly quoted.
Bridge vehicle
A fund raised by a GP on an interim basis, before launching a new fund. Bridge vehicles are often of a smaller size, compare to the normal fund.
Broker
One who acts as an intermediary between a buyer and a seller of securities.
Buffer
Unused credit facility or cash reserves.
Burn rate
The rate at which an investee company consumes investment capital.
Business angel
A private investor who provides both finance and business expertise to an investee company.
Business model
The underlying model of a company's business operation.
Business plan
A document which describes a company’s management, business concept and goals. It is a vital tool for any company seeking any type of investment funding, but is also of great value in clarifying the underlying position and realities for the management/owners themselves.
Buy-and-build strategy
Active, organic growth of portfolio companies through add-on acquisitions.
Buyback
A corporation’s repurchase of its own stock or bonds.
Buyout
A buyout is a transaction financed by a mix of debt and equity, in which a business, a business unit or a company is acquired with the help of a financial investor from the current shareholders (the vendor).See management buyout (MBO), management buyin (MBI), institutional buyout (IBO), leveraged buyout (LBO).
Buyout Fund
Funds whose strategy is to acquire other businesses; this may also include mezzanine debt funds which provide (generally subordinated) debt to facilitate financing buyouts, frequently alongside a right to some of the equity upside.
