Glossary
Family business
A family business is a firm that has either more than 50% of its voting shares owned or controlled by a single family related by blood or marriage, or that has the majority of the business owned by more than one family (i.e. Multi-family business.
Family office
A family office is an office that provides services to one (i.e. Single-family office) or several families (i.e. Multi-family office). Services can range from investment management and advice, accounting, tax and financial advice to educational planning or concierge services.See also Single-family office or Multi-family office.
Financial secondaries
A secondary deal involving a funds’ portfolio of companies that are relatively mature (five to seven years old), with some exits already realized, but not all capital drawn down. The main interest for the buyer is to negotiate a potential discount on the fund portfolio.
Financial services authority (FSA)
A UK independent non-governmental body which exercises statutory powers under the Financial Services Act 1986 and the Banking Act 1987 (as well as certain other legislation). The FSA is the Competent Authority which regulates the securities industry in the UK, and was created by the merger of functions previously performed by the Securities Investment Board (SIB), Investment Management Regulatory Organisation (IMRO), the Bank of England and other agencies.See Competent Authority.
Firm commitment underwriting
An underwriting agreement in which the underwriter agrees to assume some of the flotation risk by purchasing all the shares being offered an agreed price and then reselling them on the open market.Compare best efforts underwriting.
First preferred stock
Preferred stock which takes precedence over other preferred and common stock with regard to dividends and assets.
First stage/round
The first round of financing following a company's startup phase that involves an institutional venture capital fund.
Flat Pricing
In a flat priced deal, the entrepreneur/management team and the venture capitalist pay the same price for their ordinary shares. The balance of the funds contributed by private equity investors is used to purchase other forms of “institutional” equity (e.g. convertible loan stocks, preference shares).See envy ratio.
Float (or free float or public float)
The number of shares not held by corporate insiders that are freely tradable in the public market or markets on which a company’s securities are listed.
FOI - Freedom of Information
A legislation, which provides that any individual or company has the right to request and receive information from and about public authorities, subject to certain limitations. Within the private equity/venture capital industry, FOI refers particularly to the requests for information received by public pension funds with respect to their private equity/venture capital investments, including for example the names of the underlying funds, amounts invested and their performance.
Follow-on investment
An additional investment in a portfolio company which has already received funding from a private equity firm.Compare initial investment.
Founder economies
An agreement, whereby the founding partners of a private equity/venture capital fund receive a larger share of the capital gains, especially the carried interest, achieved by the fund. Often, a founder may also receive those gains after leaving the fund, as an acknowledgment of his or her role in building the fund.
Free cash flow
Free cash flow is defined as the after-tax operating earnings of the company, plus non-cash charges (e.g. depreciation), less investment in working capital, property, plant and equipment, and other assets.
Front office
The office or unit within a financial institution or private equity fund, which carries out the investment activity and deals with the customers of the business. For private equity funds, front office activities cover amongst others the fundraising and investor relations, deal making and sourcing, research and market analysis and the operational management of investments.
FTSE 100
An index based on the stock of the top 100 companies traded on the London Stock Exchange.See index.
Fully diluted earnings per share
Common stock (ordinary share) earnings per share calculated as if all warrants and stock options were exercised and all convertible bonds and preferred stock (and certain convertible debts) were converted. Fully diluted earnings per share are usually a more accurate reflection of the company’s real earning power.
Fund
A private equity investment fund is a vehicle for enabling pooled investment by a number of investors in equity and equity-related securities of companies (investee companies). These are generally private companies whose shares are not quoted on any stock exchange. The fund can take the form either of a company or of an unincorporated arrangement such as a limited partnership.See limited partnership.
Fund age
The age of a fund (in years) from its first drawdown to the time an IRR is calculated.
Fund Capitalisation
The total amount of capital committed to a fund by investors
Fund focus (investment stage)
The strategy of specialisation by stage of investment, sector of investment, geographical concentration. This is the opposite of a generalist fund, which does not focus on any specific geographical area, sector or stage of business.
Fund of funds
A fund that takes equity positions in other funds. A fund of fund that primarily invests in new funds is a Primary or Primaries fund of funds. One that focuses on investing in existing funds is referred to as a Secondary fund of funds.
Fund size
The total amount of capital committed by the limited and general partners of a fund.
Funded pension system
A pension system under which the contributions are saved and invested in different assets over time to pay for the benefits in the future.
Fundraising
The process in which venture capitalists themselves raise money to create an investment fund. These funds are raised from private, corporate or institutional investors, who make commitments to the fund which will be invested by the general partner.See general partner, limited partner, commitment.
