A

Acquisition. A process through which one company takes over the controlling interest of another company. Acquisition includes obtaining supplies or services by contract or purchase order with appropriated or non-appropriated funds, for the use of Federal agencies through purchase or lease.

Agreement in principle. An outline of the understanding between the parties, including the price and the major terms. It is often referred to as a letter of intent. Usually, the agreement is subject to the negotiation of a mutually acceptable definitive agreement.

Angel investor. An individual who provides capital to one or more startup companies. Unlike a partner, the angel investor is rarely involved in management. Angel investors can usually add value through their contacts and expertise.

Auction. An invitation for bids on a business by a specified date. In practice, the date is often extended for the three or four top bidders, who then are invited to improve their offers.



B

Benchmarks. Performance goals against which a company's success is measured. Benchmarks are often used by investors to help determine whether a company should receive additional funding or whether management should receive extra stock.

Book. The term used for the memorandum that describes a business for sale.

Bridge/Mezzanine funding. Financing for a company expected to go public usually within 6 to 12 months; usually so structured to be repaid from proceeds of a public offering, or to establish floor price for public offer.

Buyout. The purchase of a company or a controlling interest of a corporation's shares or product line or some business. A leveraged buyout is accomplished with borrowed money or by issuing more stock.

Buyout funding. Funds provided to enable an enterprise to acquire another enterprise or product line or business.



C

Carry. A percentage of the profits the firm makes. Carry is the venture capital. Typically, the general partners receive a combined 20% of the profit from investing. For instance, if a firm receives $100 million in capital for its fund, and over 10 years returns $400 million, the profit was $300 million. The investors, or limited partners, receive 80% or $240 million, and the general partners split 20% $60 million among themselves.

Closing. After the due diligence is done, and the venture capitalist finally decides to invest in the company, there is a legal closing of the deal. Involving lawyers and large contracts, the process can take one to four weeks.

Closing bonus. A bonus often given to lower-level employees for sourcing or doing due diligence on deals that are done. This is intended to focus their attention on the best deals and work hard to get them closed.

Co-investment. A common programme through which employees can invest their own money alongside the firm in some or all of the portfolio companies. If a firm is successful, the upside to this programme can far exceed the salary and bonuses.

Comfort letter. A letter provided by independent accountants reporting on the financial condition of a company, usually for an interim period since the last audit.

Convertible/Equity related loan. Loan convertible into equity as per pre-agreed terms.

Crater. A company that received venture capital and subsequently went bankrupt.