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Glossary Of Terms

For users of this website and all other data products of Thomson Financial, the following Glossary of Terms is provided. This glossary also serves as a primer for observers of Canada’s private equity market.

The Glossary provides the full terms for acronyms used regularly by Thomson Financial, particularly for investor types, sectors and stages of development. In this alphabetical listing, these acronyms are grouped under the term Acronym and presented as they might be found in charts or reports. Where these require further clarification, the user may look up the term identified.

The Glossary is a complement to the Methodology section of this website. Both sections will be revised and updated, as required, over time.

Thomson Financial welcomes any questions or suggestions from website users concerning definitions contained in this glossary, as well as issues relevant to our methodological framework.

 
A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z 
Acquisition The establishment of control in one business entity by another, often with the assistance of private equity. Third party acquisition is a common Exit Mechanism for private equity funds.
Acquisition for Expansion Financing Capital provided to a company to finance its controlling interest in another entity for growth purposes. See also: Stages of Development.
Acronyms AC/BU - Acquisition or buyout.
BIO - Biotechnology.
C - Corporate fund.
COMM - Communications and networking.
COMP - Computer software.
CON - Consumer products and services.
ELEC - Electronics and semiconductors.
ES - Early stage.
EX - Expansion.
FI - Foreign investor.
G - Government fund.
INT - Internet specific.
IT - Information technology.
IN - Institutional investor.
LS - Life sciences.
LSVCC - Labour-sponsored venture capital corporation.
MAN - Manufacturing and processing.
MED - Medical/health related.
MIS - Miscellaneous sectors.
OT - Other (i.e. investor type, sector, stage of development).
PI - Private independent fund.
SE - Seed stage.
ST - Start-up.
TU - Turnaround.
VC - Venture capital.
Agent A market intermediary that assists in the structuring of a private equity transaction.
Angel Investor A high net worth individual active in venture financing, typically participating at an early stage of growth. Also known as an informal investor.
Average Company Financing The dollar value of total capital invested divided by the total number of investee firms in a given period. See also: Size of Financings.
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Balanced Fund A private equity fund strategy whereby a wide range of investment targets is pursued, as distinct from a Specialized Fund.
Bridge Financing Capital provided on a short-term basis to a company prior to its going public or its next major private equity transaction.
Buyout Capital A specialized form of private equity, characterized chiefly by risk investment in established private or publicly listed firms that are undergoing a fundamental change in operations or strategy (see: Event Transaction, Middle Market). Buyout funds are often called such, even if their mandates are not exclusively buyout-related.
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Capital Available for Investment The total dollar value of Capital Under Management less those resources that have already been invested by a private equity fund. Also known as liquidity. In the case of Labour-sponsored Venture Capital Corporations, reserves required by statutes are not included in liquidity calculations.
Capital Commitment Resources flowing from individual, institutional and other external sources to private equity funds.
Capital Gains The proceeds obtained on the sale of assets.
Capital Under Management The total dollar value of capital resources, both invested and un-invested, in a private equity fund or market as a whole.
Cleantech An abbreviation of "clean technologies", cleantech refers to energy and environmental technologies producing products or services that improve operational performance, productivity, or efficiency while reducing costs, inputs, energy consumption, waste, or pollution.
Co-investment Two or more investors in a given transaction. Also known as syndication. The average rate of co-investment is the total number of investments made in the total number of deals in a given period.
Company Buyback The redemption of private stock by the management of a Portfolio Company. This is a common Exit Mechanism for private equity funds.
Corporate Fund A private equity fund that is a division or subsidiary of a financial or industrial corporation. See also: Investor Types.
CPC The Capital Pool Company program is a corporate finance tool for emerging companies offered through the TSX Venture Exchange. The CPC Program pairs an eligible private company with a public Capital Pool Company which serves as the vehicle for taking the private company public.
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Deal See: Financings and Investments.
Disbursement The actual dollar amount flowing from a private equity fund or funds to a company in a given transaction.
Divestiture Financing Capital provided to a company to facilitate the sale of its interest in a product, division or subsidiary to another business entity.
Due Diligence The process of assessing the business and financial viability of a potential investment target, as well as the potential terms and conditions of an investment agreement.
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Early Stage Financing Capital provided to a young or emerging company to facilitate its growth and development, as illustrated in Seed Financing and Start-up Financing. See also: Stages of Development.
Employee Buyout Financing Capital provided to facilitate the takeover of all or part of a business entity by employees or a labour organization. See also: Event Transaction.
Event Transaction A generic term for a range of activity of interest to buyout and mezzanine funds. "Event" refers to the nature of the specific business objective that is the basis for financing, such as a Divestiture, Management Buyout and other buyout activity, Merger/Acquisition, Re-capitalization, Restructuring/Turnaround or Succession Plan.
Exit Mechanism The strategic means by which a private equity fund liquidates its stake in a business and achieves optimal returns. There are multiple exit routes, including Acquisition, Company Buyback, Initial Public Offering, Secondary Purchase and Write-off.
Expansion Financing Capital provided to a company to facilitate its growth and development objectives. See also: Stages of Development.
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Financings and Investments Each transaction involving a private equity fund or funds in a given portfolio company represents one round of financing. Each financing is made up of one or more investments, depending on the presence of co-investors. Financings are also known as deals. See also: Size of Financings.
First-time Financing See: New Investment.
Follow-on Financing A supplementary round of financing in an existing Portfolio Company that builds on its original financing, generally in line with business growth and development. Venture-backed firms are often engaged in multiple follow-on deals.
Foreign Investor See: Investor Types
Fund The pool of capital established for the purposes of private equity activity. Often a Management Company will be responsible for several funds that may vary according to mandate or investment period.
Fund Manager See: Management Company
Fund-of-Funds A professionally managed intermediary vehicle where-in individual and institutional investors allocate or pool assets for subsequent commitment to private equity funds.
Fund-raising The activity whereby a private equity fund seeks to raise new Capital Commitments from external sources of supply. In Canada, the most active fund-raisers are LSVCCs and Private-Independent Funds.
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Government Fund A government-owned private equity fund, usually organized through a federal or provincial agency or crown corporation. See also: Investor Types.
Gatekeeper A professional advisor or intermediary operating in the private equity market on behalf of clients, such as institutional investors.
General Partner See: Limited Partnership.
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Holding Period The length of time an investor holds all or part of their interest in a portfolio company.
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Informal Investor See: Angel Investor.
Initial Public Offering (IPO) The sale or distribution of the privately-held stock of a Portfolio Company on public markets for the first time. This is a common Exit Mechanism for private equity funds, especially venture capital funds.
Institutional Investor Pension funds, insurance companies, endowments, charitable foundations, mutual funds and other non-bank financial institutions that are often key suppliers to private equity funds. In Canada, certain large institutional investors also have in-house programs for direct market activity (see: Investor Types).
Institutional Venture Capital The organized market for venture activity, based on an industry of management firms and funds, as distinct from the informal investment market (see: Angel Investors). Venture financing has taken place in Canada for decades, but a core industry emerged for the first time in the early 1980s.
Internal rate of return (IRR) The discount rate equating the present value of cash outflows with the present value of cash inflows.
Investment See: Financings and Investments.
Investor Types The key players in the private equity industry, based on particular fund structures and sources of capital supply. In the United States, private equity is dominated by Private-Independent Funds, while Canadian activity is diversified across several major groups.
  • Corporate funds (C): Subsidiaries of financial or industrial corporations.
  • Government funds (G): Agencies or crown corporations owned by government.
  • Institutional investors (IN): Funds managed inside certain large institutions.
  • Retail Funds: Funds (e.g., LSVCCs, PVCCs) established with benefit of government tax credits to individuals.
  • Private-Independent Funds (PI): Funds structured on Limited Partnerships and related vehicles.
  • Foreign investors (FI): Non-resident private equity funds or corporations active in Canada.
  • Other investors (OT): Investors with an interest in specific private equity deals, but without a permanent market presence.
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Labour-sponsored Venture Capital Corporation (LSVCC) A professionally managed private equity fund that raises capital on a retail basis from individual Canadians, with the assistance of federal and provincial government tax credits. LSVCCs operate according to some legislative specifications in most Canadian jurisdictions. See also: Investor Types and Retail Funds.
Late Stage Financing See: Stages of Development.
Lead Investor The member of a private equity syndicate that leads other co-investors into successful conclusion of a company financing. Reporting of Lead Investor commenced in January 2004.
Leveraged Buyout (LBO) A substantially debt-weighted financing of an Acquisition.
Limited Partner See: Limited Partnership.
Limited Partnership (LP) A legal fund structure most frequently used by Private-Independent Funds to raise capital from external sources, such as institutional investors. The primary relationship in this structure is the general partner (the fund manager) and the limited partner (the capital source).
Liquidity See: Capital Available for Investment.
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Management Buyout Financing Capital provided to facilitate the takeover of all or part of a business entity by a team of managers.
Management Company The professional manager of a private equity fund or funds.
Market Capitalization The total dollar value of all of a company's outstanding shares. It is calculated by multiplying the number of outstanding shares times the current market share price and is often referred to as market cap.
Merger The strategic combination of one business entity with another, often with the assistance of private equity. See also: Event Transaction.
Mezzanine Capital A specialized form of private equity, characterized chiefly by use of Subordinated Debt, or preferred stock with an equity kicker, to invest largely in the same realm of companies and deals as buyout funds (see: Event Transaction, Middle Market).
Middle Market A generic term used to describe the universe of well-established, and mostly private, companies in traditional sectors that form the demand side of much buyout and mezzanine activity.
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New Investment The original round of financing in a company. Venture-backed firms typically receive further Follow-on Financing as they grow and develop in portfolios. Also known as a first-time transaction.
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Other Investor See: Investor Types
Offering Size Total dollar amount raised through an IPO.
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Preferred Investment Range A private equity fund's preferred scope for making investments. This varies by market segment, with many venture funds preferring ranges below $10 million and many buyout/mezzanine funds preferring ranges between $10 million and $50 million or higher. See also: Size of Financings.
Provincial Venture Capital Corporation (PVCC) A professionally managed private equity fund that raises capital on a retail basis from individual Canadians, with the assistance of provincial tax credits. At present, PVCCs operate according to some legislative specifications in British Columbia and Quebec. See also: Investor Types and Retail Fund.
Portfolio Company A business entity that has secured at least one round of financing from one or more private equity funds. Also known as an investee firm.
Private Equity The generic term for the private market reflecting all forms of equity or quasi-equity investment. In a mature private equity universe, there are generally three distinct market segments: Buyout Capital, Mezzanine Capital and Venture Capital.
Private-Independent Fund A professionally managed private equity fund that raises capital from external sources of supply, such as institutional investors. Most private-independent funds utilize Limited Partnerships and related vehicles. See also: Investor Types.
Private Investment In Public Equity (PIPE) A transaction in which accredited investors are allowed to purchase stock in a public company through an exemption allowed by provincial securities regulation. As a result of the exemption, there is less disclosure required by these investors than for other more widely distributed issues, like IPOs and secondary offerings.
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Re-capitalization Financing Capital provided for a significant overhaul of a company's financial structure. See also: Event Transactions.
Restructuring/ Turnaround Financing Capital provided to a established firm, usually in a traditional sector, that is undergoing financial distress or a major re-organization, but is perceived as having long-term commercial viability. See also: Event Transactions.
Retail Fund A category of professionally managed private equity fund that relies on tax-assisted retail fund-raising, composed essentially of Labour-Sponsored Venture Capital Corporations and Provincial Venture Capital Corporations. See also: Investor Types
Return See: Internal Rate of Return.
RTO A private company strategy for gaining access to public markets through takeover of a listed business entity.
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Secondary Purchase The sale of private or restricted holdings in a portfolio company by one investor to another.
Seed Financing Capital provided to facilitate commercialization of new product concepts, often from laboratories, research centres or entrepreneurs. If successful, a seed financing may result in a Start-up. See also: Stages of Development.
Size of Financings Transactions defined according to their respective sizes. In the venture capital realm, there are four categories of deal size.
  • Very small deals: Less than $500,000.
  • Small deals: Less than $1 million.
  • Mid-sized deals: Between $1 million and $5 million.
  • Large deals: Greater than $5 million.

See also: Preferred Investment Range.
Specialized Fund A private equity fund strategy whereby the focus in on specific investment targets (e.g., sectors, stages of development), as distinct from a Balanced Fund.
Stages of Development Critical points on the growth continuum for firms assisted by venture capital and other types of private equity. Typically, a venture-backed company receives cumulative rounds of financing to facilitate its progression from one stage of development to the next.
  • Early Stages of Development
    • Seed stage: A developing business entity that has not yet established commercial operations and needs financing for research and product development.
    • Start-up: A business in the earliest phase of established operations and needs capital for product development, initial marketing and other goals.
    • Other early stage: A firm that has begun initial marketing and related development and needs financing to achieve full commercial production and sales.
  • Late Stages of Development
    • Expansion: An established or near-established company that needs capital to expand its productive capacity, marketing and sales.
    • Acquistion/Buyout: An established or near-established firm that needs financing to acquire all or a portion of another business entity for growth purposes, such as an Acquisition for Expansion Financing.
    • Turnaround: An established or near-established company that needs capital to address a temporary situation of financial or operational distress.
    • Other stage: Includes Secondary Purchase, or the sale of portfolio assets among investors, and working capital.
Start-up Financing Capital provided to facilitate the first-time establishment of a legal company structure around a marketable product concept. See also: Stages of Development.
Succession Plan The basis for transfer of business ownership from one generation of managers to the next, often with the assistance of private equity.
Subordinated Debt A financial instrument with qualities of both debt and equity, often used in transactions as an alternative, or complement to, pure equity. See also: Mezzanine Financing.
Syndication See: Co-investment.
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Turnaround Financing See: Restructuring/Turnaround Financing and Stages Of Development.
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Valuation Policy The method or guidelines used by a private equity fund to determine the value of its portfolio assets.
Venture Capital A specialized form of private equity, characterized chiefly by high-risk investment in new or young companies following a growth path (see: Stages of Development) in technology and other value-added sectors.
Vintage Year The year in which a private equity fund is first created.
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Write-off The write-down of a portfolio asset to the value of zero, with the result that the private equity investor or investors go without proceeds upon disposition.
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