Glossary
Early-stage
Seed and start-up stages of a business.See seed, start-up. Compare later stage.
Early-Stage Fund
Venture capital funds focused on investing in companies in the early part of their lives.
Earn-out
An arrangement whereby the sellers of a business may receive additional future payments for the business, conditional to the performance of the business following the deal.
EASD (European Association of Securities Dealers)
An association of securities houses, investment banks, private equity firms, professional advisors and others formed to promote the development of securities markets in Europe for growth companies. EASD’s ambition is to be the most effective organisation to foster the best conditions for seamless European investment and trading. The creation of the EASDAQ stock market was one of its first initiatives. EASD has over 165 member organisations and is headquartered in Brussels.
EBIT
Earnings before interest and taxes – a financial measurement often used in valuing a company (price paid expressed as a multiple of EBIT).
EBITDA
Earnings before interest, taxes, depreciation and amortisation – a financial measurement often used in valuing a company (price paid expressed as a multiple of EBITDA).
Elevator Pitch
A term comparing the time an entrepreneur has to gain the interest of a venture capitalist for his business idea with an elevator ride.
Enterprise DCF model
Variant of the DCF model which looks at the company’s operations and calculates the present value of future free cash flows by discounting them with the weighted average cost of capital.See free cash flow, weighted average cost of capital.
Entrepreneur in residence (EIR)
An entrepreneur that has experience in creating a business and who would like to work in a venture capital fund using the funds’ network, deal flow and resources to develop new or existing portfolio companies.
Envy ratio
The ratio between the effective price paid by management and that paid by the investing institution for their respective holdings in the NewCo in an MBO or MBI.Envy ratio = (IC/I%):(MC/M%), where:- IC = investors amount to be invested in NewCo- I% = investors’ ownership in NewCo.- MC = management amount to be invested in NewCo- M% = management percentage ownership of NewCo (ie percentage of ordinary shares owned)Example: If the VC invests £5m for 60% equity and the management invests £0.2m for 40% ordinary shares the envy ratio is:Envy ratio=(5/60)/(0.2/40)=16.7
Equity
Ownership interest in a company, represented by the shares issued to investors.
Equity kicker
In a mezzanine loan, equity warrants payable on exit.
Equity ratio
One of the indicators used by banks to calculate debt ceiling. It consists of net equity divided by the company’s total assets. Banks apply yardstick ratios for different industry sectors to arrive at a minimum level of funding that shareholders are required to contribute.
Equity Story
The background research undertaken to identify the strengths and weaknesses related to a stock, assessing institutional investors' interests in purchasing the stock, valuation, and supporting our banking professionals on the structural elements of the deal.
EURONEXT
The stock market entity resulting from the merger of the Amsterdam, Brussels and Paris stock exchanges, signed in September 2000.See Nouveau Marché.
European-style option
An option which can only be exercised for a short, specified period of time just prior to its expiration, usually a single day. Also called European option.
EVCA Professional Standards
EVCA professional standards are a unique set of behavioural principles that encompass the relationship between limited partners, general partners and portfolio companies. The EVCA Professional Standards encompass a Code of Conduct, Governing Principles, and Corporate Governance, Valuation and Reporting Guidelines.
EVCA Professional Standards
EVCA professional standards are a unique set of behavioural principles that encompass the relationship between limited partners, general partners and portfolio companies. The EVCA Professional Standards encompass a Code of Conduct, Governing Principles, and Corporate Governance, Valuation and Reporting Guidelines.
Exercise of a stock option
When an option or warrant holder takes up his or her option to buy or sell the underlying instrument (for example shares, commodities, an index, etc.), he/she is said to exercise the option or warrant.
Exercise price
The price at which shares subject to a stock option may be purchased. Also known as the strike price.
Exit
Liquidation of holdings by a private equity fund. Among the various methods of exiting an investment are: trade sale; sale by public offering (including IPO); write-offs; repayment of preference shares/loans; sale to another venture capitalist; sale to a financial institution.
Exit strategy
A private equity house or venture capitalist’s plan to end an investment, liquidate holdings and achieve maximum return.
Exiting climates
The conditions which influence the viability and attractiveness of various exit strategies.
Expansion capital
Also called development capital. Financing provided for the growth and expansion of a company, which may or may not break even or trade profitably. Capital may be used to: finance increased production capacity; market or product development; provide additional working capital.
Expansion, replacement capital and buyout stages of investment.
Compare early stage.
