The language of private equity
80 terms in plain English — from carry and waterfalls to unitranche and continuation vehicles. Search or filter by category.
80 terms
100-Day Plan
Returns & Ops
The sponsor's priority actions right after closing.
ABL (Asset-Based Lending)
Debt
Financing secured by receivables and inventory.
Add-On / Bolt-On
Deal
A small acquisition folded into an existing platform.
Adjusted EBITDA
Returns & Ops
EBITDA normalized for one-off and owner-specific items.
Blind Pool
Fund Structure
A fund raised before its deals are chosen.
Bolt-On Synergies
Returns & Ops
Savings and revenue gains from combining an add-on with a platform.
Buy-and-Build
Deal
Grow a platform through repeated add-on acquisitions.
Capital Call (Drawdown)
Fund Structure
GP's request for LPs to fund part of their commitment.
Carried Interest (Carry)
Fund Structure
The GP's share of profits, usually about 20%.
Carve-Out
Deal
Buying a division spun out of a larger parent.
Clawback
Fund Structure
GP must repay carry it was overpaid over the fund's life.
Closed-End Fund
Fund Structure
A fixed-life fund that raises, invests, then winds down.
Co-Investment
Fund Structure
An LP's fee-light direct stake in a specific deal.
Continuation Vehicle (Continuation Fund)
LP & Fundraising
A new fund that holds assets rolled out of an older fund.
Covenant-Lite (Cov-Lite)
Debt
A loan with few or no maintenance financial covenants.
Data Room
Deal
Secure document repository used during diligence.
Distribution
Fund Structure
Cash the fund returns to its investors.
Distribution Waterfall (American vs European)
Fund Structure
Rules for splitting cash between LPs and GP.
Dividend Recapitalization
Deal
Borrowing to pay the sponsor a dividend before exit.
DPI (Distributions to Paid-In)
Fund Structure
Cash returned to LPs divided by cash they paid in.
Dry Powder
Fund Structure
Committed capital raised but not yet invested.
Due Diligence
Deal
Pre-close investigation of a target across all areas.
Earnout
Deal
Deferred payment contingent on hitting post-close targets.
EBITDA
Returns & Ops
Earnings before interest, taxes, depreciation, and amortization.
Exit
Returns & Ops
Selling a portfolio company to realize the investment.
Fixed Charge Coverage Ratio (FCCR)
Debt
Whether earnings cover interest, principal, and leases.
Fund of One
Fund Structure
A private fund built for one investor.
Fund-of-Funds (FoF)
LP & Fundraising
A fund that invests across many other PE funds.
General Partner (GP)
Fund Structure
The firm that manages the fund and makes investment decisions.
GP Commitment
Fund Structure
Capital the managers invest in their own fund.
Growth Equity
Deal
Equity to scale a mature, fast-growing company.
High-Yield Bonds
Debt
Below-investment-grade bonds paying higher interest.
Holding Period
Returns & Ops
How long a fund owns a company before exiting.
Hurdle Rate / Preferred Return
Fund Structure
Minimum LP return (often ~8%) before carry kicks in.
ILPA (Institutional Limited Partners Association)
LP & Fundraising
The main standards body for institutional LPs.
Intercreditor Agreement
Debt
Contract setting priority and rights among a borrower's lenders.
IRR (Internal Rate of Return)
Fund Structure
Annualized return that accounts for cash-flow timing.
Letter of Intent (LOI)
Deal
Non-binding outline of proposed deal terms.
Leverage
Debt
Using debt to amplify equity returns and risk.
Leverage Ratio (Debt/EBITDA)
Debt
Total debt divided by EBITDA, a key measure of debt load.
Leveraged Buyout (LBO)
Deal
Buying a company mostly with borrowed money.
Limited Partner (LP)
Fund Structure
A passive investor who supplies capital to the fund.
Limited Partnership Agreement (LPA)
Fund Structure
The master contract governing a fund's terms and economics.
Management Buy-In (MBI)
Deal
An outside team buys and runs the company.
Management Buyout (MBO)
Deal
Existing managers buy the company, backed by a sponsor.
Management Company
Fund Structure
The firm entity that employs staff and collects the management fee.
Management Fee
Fund Structure
Annual fee (often ~2%) that funds firm operations.
Mezzanine Debt
Debt
Junior debt between senior debt and equity, often with warrants.
MFN (Most Favored Nation)
LP & Fundraising
Lets LPs opt into terms granted to other investors.
Minority Recapitalization
Deal
Selling a minority stake while founders keep control.
MOIC (Multiple on Invested Capital)
Fund Structure
Total value returned as a multiple of capital invested.
Multiple Expansion
Returns & Ops
Selling at a higher valuation multiple than the entry multiple.
NAV Loan
LP & Fundraising
Fund-level debt secured by the portfolio's value.
ODD (Operational Due Diligence)
LP & Fundraising
LP review of a GP's operations, controls, and compliance.
Operating Partner
Returns & Ops
A hands-on executive who improves portfolio companies.
PIK (Payment-in-Kind)
Debt
Interest added to the loan balance instead of paid in cash.
Placement Agent
LP & Fundraising
A firm that helps a GP raise capital from LPs.
Platform Company
Deal
The anchor acquisition that add-ons are built onto.
Portfolio Company (PortCo)
Returns & Ops
A business owned by a PE fund.
PPM (Private Placement Memorandum)
LP & Fundraising
The fund's formal offering and disclosure document.
Purchase Price Allocation (PPA)
Deal
Assigning the price paid across acquired assets and goodwill.
Quality of Earnings (QoE)
Deal
Diligence that validates a target's real, recurring earnings.
Roll-Up
Deal
Consolidating many small firms into one larger business.
Rollover Equity
Deal
Seller reinvests part of proceeds into the new deal.
Second Lien
Debt
Secured debt that ranks behind first-lien lenders.
Secondary (LP-led vs GP-led)
LP & Fundraising
Sale of an existing fund interest, LP-led or GP-led.
Secondary Buyout (SBO)
Deal
One PE firm sells a portfolio company to another.
Senior Debt
Debt
The top-priority, secured layer of a company's debt.
Separately Managed Account (SMA)
Fund Structure
A customized, single-investor mandate managed by a GP.
Side Letter
LP & Fundraising
A per-investor agreement granting bespoke terms.
SPV (Special Purpose Vehicle)
Fund Structure
A single-purpose entity that holds one deal or asset.
Subscription Agreement
LP & Fundraising
The contract by which an LP commits to a fund.
Subscription Line (Capital Call Facility)
LP & Fundraising
Fund credit line secured by undrawn LP commitments.
Take-Private
Deal
Buying a public company and delisting it.
Term Loan B (TLB)
Debt
Institutional senior term loan common in LBOs.
TVPI (Total Value to Paid-In)
Fund Structure
Total realized plus unrealized value per dollar paid in.
Unitranche
Debt
A single blended-rate loan replacing senior plus junior debt.
Value Creation
Returns & Ops
Actions that grow a portfolio company's value.
Vintage Year
Fund Structure
The year a fund starts investing, used for benchmarking.
Working Capital Adjustment
Deal
Price true-up based on delivered vs. target working capital.