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Mergers & Acquisitions (M&A)
The process of consolidating companies or assets through various types of financial transactions.
Initial Public Offering (IPO)
The process through which a private company offers shares to the public for the first time.
Debt Financing
Raising capital through the issuance of debt instruments, typically loans or bonds.
Equity Financing
Raising capital by selling shares of stock in the company.
Leveraged Buyout (LBO)
The acquisition of a company using a significant amount of borrowed money to meet the cost of acquisition.
Pitch Book
A marketing document used by investment banks to pitch their services to potential clients.
Due Diligence
The investigation and evaluation of a business or investment opportunity before finalizing a transaction.
Capital Markets
Financial markets where long-term debt or equity-backed securities are bought and sold.
Enterprise Value (EV)
A measure of a company's total value, often used as a comprehensive alternative to equity market capitalization.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of a company's overall financial performance.
Discounted Cash Flow (DCF)
A valuation method used to estimate the value of an investment based on its expected future cash flows.
Comparable Company Analysis (Comps)
A valuation method that compares a company's financial metrics to those of similar companies.
Precedent Transactions
Analysis of past transactions involving similar companies to derive valuation benchmarks.
Accretion/Dilution Analysis
An analysis to determine the impact of an acquisition on the acquiring company's earnings per share.
Synergies
The potential financial benefit achieved through the combining of companies.
Underwriting
The process by which an underwriter assesses the risk of insuring a company or issuing securities.
Roadshow
A series of presentations made by a company to potential investors prior to an IPO.
Bookbuilding
The process of generating, capturing, and recording investor demand for shares during an IPO.
Fairness Opinion
An assessment by a financial advisor of the fairness of a transaction's financial terms.
Sell-side vs Buy-side
Sell-side refers to firms that issue, sell, or trade securities, while buy-side refers to firms that purchase securities for investment.
Limited Partner (LP)
An investor in a private equity fund who has limited liability and does not participate in the management.
General Partner (GP)
The partner in a private equity fund responsible for managing the fund and making investment decisions.
Carried Interest
The share of profits that the general partners of a private equity fund receive as compensation.
Management Fees
Fees paid to the general partner for managing the fund, typically a percentage of the committed capital.
Fundraising
The process of gathering capital from investors to create a fund.
Deal Sourcing
The process of identifying and pursuing potential investment opportunities.
Portfolio Company
A company in which a private equity firm invests.
Exit Strategies
Methods by which an investor can realize a return on investment, such as IPO, strategic sale, or secondary buyout.
Internal Rate of Return (IRR)
The discount rate that makes the net present value of all cash flows from a particular investment equal to zero.
Multiple on Invested Capital (MOIC)
A measure of the total value of an investment relative to the amount of capital invested.
Debt/Equity Ratio
A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.
Add-on Acquisition
An acquisition of a smaller company by a private equity firm that already owns a larger company in the same industry.
Capital Call
A request by a private equity fund for investors to provide a portion of their committed capital.
Distribution Waterfall
The order in which profits are distributed to investors in a private equity fund.
Fund Vintage Year
The year in which a private equity fund begins investing.
Secondary Market (for PE stakes)
A market where investors can buy and sell existing stakes in private equity funds.
Asset Classes
Categories of investments, including equities, bonds, and alternatives.
Risk vs. Return
The relationship between the potential risk of an investment and the expected return.
Alpha & Beta
Alpha measures an investment's performance relative to a benchmark, while Beta measures its volatility relative to the market.
Sharpe Ratio
A measure of risk-adjusted return, calculated as the excess return per unit of risk.
Market Capitalization (Market Cap)
The total market value of a company's outstanding shares of stock.
Dividend Yield
A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
Price-to-Earnings (P/E) Ratio
A valuation ratio calculated by dividing the current share price by its earnings per share.
Book Value
The value of a company's assets minus its liabilities.
Free Cash Flow
The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.
Volatility
A statistical measure of the dispersion of returns for a given security or market index.
Bull Market / Bear Market
A bull market is characterized by rising prices, while a bear market is characterized by falling prices.
Market Correction
A decline of 10% or more in the price of a security or market index from its most recent peak.
Drawdown
The reduction of one's capital after a series of losing trades.
Stop Loss
An order placed with a broker to buy or sell once the stock reaches a certain price.
Order Types
Different types of orders that can be placed in the market, such as market, limit, and stop orders.
Liquidity
The availability of liquid assets to a market or company.
Spread (Bid-Ask Spread)
The difference between the bid price and the ask price of a security.
Exchange-Traded Fund (ETF)
A type of fund that owns underlying assets and divides ownership of those assets into shares.
Mutual Fund
An investment vehicle made up of a pool of money collected from many investors to purchase securities.
Hedge Fund
An investment fund that employs various strategies to earn active return for its investors.
Index Fund
A type of mutual fund with a portfolio constructed to match or track the components of a market index.
Sovereign Debt
Debt issued by a national government in a foreign currency.
Credit Rating
An assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.
Yield Curve
A graph that plots the interest rates of bonds having equal credit quality but differing maturity dates.
Seed Stage
The earliest stage of a startup's lifecycle, where initial funding is sought to develop a product.
Series A, B, C Funding
Rounds of financing for startups, typically following the seed stage, to scale the business.
Pre-Money vs. Post-Money Valuation
Pre-money valuation is the value of a company before investment, while post-money valuation is after the investment.
Cap Table (Capitalization Table)
A table that shows the equity ownership capitalization for a company.
Term Sheet
A non-binding agreement that outlines the basic terms and conditions of an investment.
Convertible Note
A type of debt that can be converted into equity at a later date.
Equity Dilution
The reduction in existing shareholders' ownership percentage due to the issuance of new shares.
Vesting Schedule
A timeline that outlines when an employee earns their equity in a company.
Runway
The amount of time a company can operate before it runs out of cash.
Burn Rate
The rate at which a company is spending its capital before reaching profitability.
Exit Event
A liquidity event that allows investors to realize their investment gains, such as an acquisition or IPO.
Unicorn
A startup valued at over $1 billion.
Lead Investor
The investor who takes the initiative in organizing a financing round.
Syndicate
A group of investors that come together to fund a particular investment.
Liquidation Preference
The order in which investors are paid back in the event of a liquidation.
Pro Rata Rights
The right of existing investors to maintain their ownership percentage by purchasing additional shares in future rounds.
Management Fee
A fee charged by a fund manager for managing the fund.
Valuation Cap
The maximum valuation at which a convertible note can convert into equity.
Discounted Cash Flow (DCF) Model
A financial model that estimates the value of an investment based on its expected future cash flows.
Weighted Average Cost of Capital (WACC)
The average rate of return a company is expected to pay its security holders to finance its assets.
Terminal Value
The value of a business at the end of a forecast period, often used in DCF calculations.
Free Cash Flow to Firm (FCFF)
Cash flow available to all investors in a firm, including equity and debt holders.
Free Cash Flow to Equity (FCFE)
Cash flow available to equity shareholders after all expenses, reinvestments, and debt repayments.
Net Present Value (NPV)
The difference between the present value of cash inflows and outflows over a period of time.
Sensitivity Analysis
A technique used to determine how different values of an independent variable affect a particular dependent variable.
Scenario Analysis
A process of analyzing possible future events by considering alternative possible outcomes.
Leveraged Buyout (LBO) Model
A financial model used to evaluate the feasibility of a leveraged buyout transaction.
Precedent Transactions Analysis
An analysis of past transactions involving similar companies to derive valuation benchmarks.
Depreciation & Amortization
Accounting methods for allocating the cost of tangible and intangible assets over their useful lives.
Working Capital
The difference between a company's current assets and current liabilities.
Capital Expenditures (CapEx)
Funds used by a company to acquire, upgrade, and maintain physical assets.
Debt Schedule
A detailed breakdown of a company's debt obligations.
Accretion/Dilution
The impact of an acquisition on the acquiring company's earnings per share.
Beta (Levered vs. Unlevered)
Beta measures the volatility of an asset in relation to the overall market; levered beta includes debt effects.
Cost of Equity
The return a company requires to decide if an investment meets capital return requirements.
Cost of Debt
The effective rate that a company pays on its borrowed funds.
Cash Flow Statement
A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives.
Income Statement
A financial statement that reports a company's financial performance over a specific accounting period.
Balance Sheet
A financial statement that summarizes a company's assets, liabilities, and shareholders' equity.
EBITDA Margin
A measure of a company's operating profitability as a percentage of its total revenue.