Investment Glossary – Stalliongates Capital

Investor Education

Private Equity Glossary

Master the language of private equity and institutional investing. From IRR to carried interest, understand the terms that drive investment decisions.

Waterfall

Fund Operations

The structure determining how distributions are allocated between investors and fund managers. Typically follows: return of capital, preferred return, catch-up, then profit split.

Venture Capital

Deal Types

Financing provided to early-stage, high-potential companies in exchange for equity. Higher risk but potentially higher returns than later-stage private equity.

Vintage Year

Fund Operations

The year in which a fund makes its first investment or the year the fund was established. Used to compare fund performance across similar time periods.

Trade Sale

Exit Strategies

The sale of a portfolio company to a strategic buyer, typically a larger company in the same industry. Often achieves premium valuations due to strategic synergies.

TVPI (Total Value to Paid-In Capital)

Performance Metrics

The ratio of the current value of remaining investments plus distributions to the total amount of capital paid into the fund. Combines realized and unrealized returns.

Sponsor-to-Sponsor Sale

Exit Strategies

The sale of a portfolio company from one private equity firm to another. Common for companies that have more growth potential under continued private ownership.

Secondary Transaction

Deal Types

The purchase of existing fund interests or portfolio company stakes from current investors. Provides liquidity to sellers and entry points for buyers.

SPV (Special Purpose Vehicle)

Investment Structures

A separate legal entity created for a specific investment or transaction. Isolates financial risk and provides structural flexibility for complex deals.

ROI (Return on Investment)

Performance Metrics

A performance measure used to evaluate the efficiency of an investment. Calculated by dividing the net profit by the cost of the investment, expressed as a percentage.

RVPI (Residual Value to Paid-In Capital)

Performance Metrics

The ratio of the current value of all remaining investments to the total capital contributed. Represents the unrealized portion of a fund’s return.

Qualified Purchaser

Investment Structures

A higher standard than accredited investor, requiring $5M+ in investments. Required for certain fund structures and provides access to a broader range of private investments.

Partial Exit

Exit Strategies

Selling a portion of an investment while retaining some ownership. Allows investors to realize some returns while maintaining upside exposure.

Platform Company

Deal Types

An initial acquisition that serves as the foundation for a buy-and-build strategy. Subsequent add-on acquisitions are integrated into the platform.

NAV (Net Asset Value)

Valuation

The value of a fund’s assets minus liabilities, representing the fair market value of all investments. Reported quarterly and used to calculate fund performance.

NPV (Net Present Value)

Performance Metrics

The difference between the present value of cash inflows and outflows over a period of time. A positive NPV indicates the investment is expected to generate value.

Management Buyout (MBO)

Deal Types

A transaction where a company’s management team acquires the business, often with private equity backing. Aligns management incentives with ownership.

Management Fee

Fund Operations

An annual fee charged by fund managers to cover operational costs, typically 1.5-2% of committed capital during the investment period and 1-1.5% of invested capital thereafter.

MOIC (Multiple on Invested Capital)

Performance Metrics

A measure of how much value an investment has generated relative to the initial investment. A MOIC of 2.0x means the investment returned twice the original capital. Also known as Multiple of Money (MoM).

Leveraged Buyout (LBO)

Deal Types

The acquisition of a company using significant debt financing, with the target company’s assets and cash flows used to secure and repay the debt. A core private equity strategy.

Limited Partner (LP)

Investment Structures

An investor in a private equity fund who provides capital but has limited liability and no management control. LPs include pension funds, endowments, family offices, and high-net-worth individuals.

J-Curve

Valuation

The typical pattern of private equity fund returns over time: negative returns in early years (due to fees and unrealized investments) followed by positive returns as investments mature and exit.

IPO (Initial Public Offering)

Exit Strategies

The first sale of stock by a private company to the public. A common exit strategy for successful portfolio companies, providing liquidity and public market valuation.

IRR (Internal Rate of Return)

Performance Metrics

A metric used to estimate the profitability of potential investments. IRR is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. Higher IRR indicates a more desirable investment.

Hurdle Rate

Performance Metrics

The minimum rate of return required before a fund manager can receive carried interest. Typically set at 8% annually, protecting investors by ensuring base returns before profit sharing.

Growth Equity

Deal Types

Investment in relatively mature companies seeking capital for expansion, restructuring, or market entry without changing control. Less leverage than traditional buyouts.

General Partner (GP)

Investment Structures

The fund manager responsible for making investment decisions and managing portfolio companies. GPs have unlimited liability and typically invest 1-5% of fund capital alongside LPs.

Fund of Funds

Investment Structures

An investment strategy that invests in multiple private equity funds rather than directly in companies. Provides diversification but adds an additional layer of fees.

Fund Life

Fund Operations

The expected duration of a private equity fund, typically 10-12 years. Includes an investment period (3-5 years) and a harvesting period when investments are exited.

EV/EBITDA Multiple

Valuation

A valuation ratio comparing enterprise value to EBITDA. Industry-specific multiples are used to value companies (e.g., 8x EBITDA means EV is 8 times annual EBITDA).

Enterprise Value (EV)

Valuation

The total value of a company including equity and debt, minus cash. Represents the theoretical takeover price and is used in valuation multiples.

EBITDA

Valuation

Earnings Before Interest, Taxes, Depreciation, and Amortization. A key metric for valuing companies and measuring operational performance, often used as a basis for valuation multiples.

Dividend Recapitalization

Exit Strategies

A transaction where a company takes on new debt to pay a special dividend to shareholders. Allows investors to realize returns while maintaining ownership.

Due Diligence

Valuation

Comprehensive investigation of a potential investment including financial, legal, operational, and commercial analysis. Critical for identifying risks and validating assumptions.

Distressed Investing

Deal Types

Investing in companies experiencing financial difficulty, bankruptcy, or operational challenges. Requires specialized expertise in turnarounds and restructuring.

Drawdown

Fund Operations

The process of calling committed capital from investors. Also refers to the percentage of committed capital that has been called. A fund with 60% drawdown has called 60% of commitments.

Distribution

Fund Operations

The return of capital and profits to investors from a fund. Distributions occur when portfolio companies are sold or generate dividends, returning value to limited partners.

DPI (Distributions to Paid-In Capital)

Performance Metrics

A ratio measuring the cumulative distributions returned to investors relative to the capital they contributed. A DPI of 1.0x means investors have received back their entire investment.

Co-Investment

Investment Structures

Direct investment alongside a private equity fund in a specific deal, typically offered to LPs. Usually comes with reduced or no fees and allows larger exposure to attractive opportunities.

Carried Interest (Carry)

Fund Operations

The share of profits that fund managers receive as compensation, typically 20% of profits above the hurdle rate. Aligns manager interests with investor returns.

Committed Capital

Fund Operations

The total amount of money an investor has pledged to contribute to a fund over its lifetime. Capital is drawn down over time as investments are made.

Capital Call

Fund Operations

A request from a fund manager to investors to contribute a portion of their committed capital. Investors typically have 10-14 days to fulfill capital calls when investment opportunities arise.

Add-On Acquisition

Deal Types

A smaller company acquired to complement and enhance an existing portfolio company (platform). Used to accelerate growth and create value through consolidation.

Accredited Investor

Investment Structures

The traditional private equity fee structure: 2% annual management fee on committed capital plus 20% carried interest on profits. Variations exist based on fund size and strategy.

2 and 20

Fund Operations

The traditional private equity fee structure: 2% annual management fee on committed capital plus 20% carried interest on profits. Variations exist based on fund size and strategy.

Venture Capital

Deal Types

Financing provided to early-stage, high-potential companies in exchange for equity. Higher risk but potentially higher returns than later-stage private equity.

Secondary Transaction

Deal Types

The purchase of existing fund interests or portfolio company stakes from current investors. Provides liquidity to sellers and entry points for buyers.

Platform Company

Deal Types

An initial acquisition that serves as the foundation for a buy-and-build strategy. Subsequent add-on acquisitions are integrated into the platform.

Management Buyout (MBO)

Deal Types

A transaction where a company’s management team acquires the business, often with private equity backing. Aligns management incentives with ownership.

Leveraged Buyout (LBO)

Deal Types

The acquisition of a company using significant debt financing, with the target company’s assets and cash flows used to secure and repay the debt. A core private equity strategy.

Growth Equity

Deal Types

Investment in relatively mature companies seeking capital for expansion, restructuring, or market entry without changing control. Less leverage than traditional buyouts.

Distressed Investing

Deal Types

Investing in companies experiencing financial difficulty, bankruptcy, or operational challenges. Requires specialized expertise in turnarounds and restructuring.

Add-On Acquisition

Deal Types

A smaller company acquired to complement and enhance an existing portfolio company (platform). Used to accelerate growth and create value through consolidation.

Trade Sale

Exit Strategies

The sale of a portfolio company to a strategic buyer, typically a larger company in the same industry. Often achieves premium valuations due to strategic synergies.

Sponsor-to-Sponsor Sale

Exit Strategies

The sale of a portfolio company from one private equity firm to another. Common for companies that have more growth potential under continued private ownership.

Partial Exit

Exit Strategies

Selling a portion of an investment while retaining some ownership. Allows investors to realize some returns while maintaining upside exposure.

IPO (Initial Public Offering)

Exit Strategies

The first sale of stock by a private company to the public. A common exit strategy for successful portfolio companies, providing liquidity and public market valuation.

Dividend Recapitalization

Exit Strategies

A transaction where a company takes on new debt to pay a special dividend to shareholders. Allows investors to realize returns while maintaining ownership.

Waterfall

Fund Operations

The structure determining how distributions are allocated between investors and fund managers. Typically follows: return of capital, preferred return, catch-up, then profit split.

Vintage Year

Fund Operations

The year in which a fund makes its first investment or the year the fund was established. Used to compare fund performance across similar time periods.

Management Fee

Fund Operations

An annual fee charged by fund managers to cover operational costs, typically 1.5-2% of committed capital during the investment period and 1-1.5% of invested capital thereafter.

Fund Life

Fund Operations

The expected duration of a private equity fund, typically 10-12 years. Includes an investment period (3-5 years) and a harvesting period when investments are exited.

Drawdown

Fund Operations

The process of calling committed capital from investors. Also refers to the percentage of committed capital that has been called. A fund with 60% drawdown has called 60% of commitments.

Distribution

Fund Operations

The return of capital and profits to investors from a fund. Distributions occur when portfolio companies are sold or generate dividends, returning value to limited partners.

Carried Interest (Carry)

Fund Operations

The share of profits that fund managers receive as compensation, typically 20% of profits above the hurdle rate. Aligns manager interests with investor returns.

Committed Capital

Fund Operations

The total amount of money an investor has pledged to contribute to a fund over its lifetime. Capital is drawn down over time as investments are made.

Capital Call

Fund Operations

A request from a fund manager to investors to contribute a portion of their committed capital. Investors typically have 10-14 days to fulfill capital calls when investment opportunities arise.

2 and 20

Fund Operations

The traditional private equity fee structure: 2% annual management fee on committed capital plus 20% carried interest on profits. Variations exist based on fund size and strategy.

SPV (Special Purpose Vehicle)

Investment Structures

A separate legal entity created for a specific investment or transaction. Isolates financial risk and provides structural flexibility for complex deals.

Qualified Purchaser

Investment Structures

A higher standard than accredited investor, requiring $5M+ in investments. Required for certain fund structures and provides access to a broader range of private investments.

Limited Partner (LP)

Investment Structures

An investor in a private equity fund who provides capital but has limited liability and no management control. LPs include pension funds, endowments, family offices, and high-net-worth individuals.

General Partner (GP)

Investment Structures

The fund manager responsible for making investment decisions and managing portfolio companies. GPs have unlimited liability and typically invest 1-5% of fund capital alongside LPs.

Fund of Funds

Investment Structures

An investment strategy that invests in multiple private equity funds rather than directly in companies. Provides diversification but adds an additional layer of fees.

Co-Investment

Investment Structures

Direct investment alongside a private equity fund in a specific deal, typically offered to LPs. Usually comes with reduced or no fees and allows larger exposure to attractive opportunities.

Accredited Investor

Investment Structures

The traditional private equity fee structure: 2% annual management fee on committed capital plus 20% carried interest on profits. Variations exist based on fund size and strategy.

TVPI (Total Value to Paid-In Capital)

Performance Metrics

The ratio of the current value of remaining investments plus distributions to the total amount of capital paid into the fund. Combines realized and unrealized returns.

ROI (Return on Investment)

Performance Metrics

A performance measure used to evaluate the efficiency of an investment. Calculated by dividing the net profit by the cost of the investment, expressed as a percentage.

RVPI (Residual Value to Paid-In Capital)

Performance Metrics

The ratio of the current value of all remaining investments to the total capital contributed. Represents the unrealized portion of a fund’s return.

NPV (Net Present Value)

Performance Metrics

The difference between the present value of cash inflows and outflows over a period of time. A positive NPV indicates the investment is expected to generate value.

MOIC (Multiple on Invested Capital)

Performance Metrics

IRR (Internal Rate of Return)

Performance Metrics

Hurdle Rate

Performance Metrics

The minimum rate of return required before a fund manager can receive carried interest. Typically set at 8% annually, protecting investors by ensuring base returns before profit sharing.

DPI (Distributions to Paid-In Capital)

Performance Metrics

A ratio measuring the cumulative distributions returned to investors relative to the capital they contributed. A DPI of 1.0x means investors have received back their entire investment.

NAV (Net Asset Value)

Valuation

The value of a fund’s assets minus liabilities, representing the fair market value of all investments. Reported quarterly and used to calculate fund performance.

J-Curve

Valuation

The typical pattern of private equity fund returns over time: negative returns in early years (due to fees and unrealized investments) followed by positive returns as investments mature and exit.

EV/EBITDA Multiple

Valuation

A valuation ratio comparing enterprise value to EBITDA. Industry-specific multiples are used to value companies (e.g., 8x EBITDA means EV is 8 times annual EBITDA).

Enterprise Value (EV)

Valuation

The total value of a company including equity and debt, minus cash. Represents the theoretical takeover price and is used in valuation multiples.

EBITDA

Valuation

Earnings Before Interest, Taxes, Depreciation, and Amortization. A key metric for valuing companies and measuring operational performance, often used as a basis for valuation multiples.

Due Diligence

Valuation

Comprehensive investigation of a potential investment including financial, legal, operational, and commercial analysis. Critical for identifying risks and validating assumptions.