Optimus Template

Absolute return

The return an asset achieves over time, without comparison to the overall market, other assets or benchmarks.

Acquisition

The obtaining of control, possession or ownership of a company.

Acting in concert

Persons acting in concert are persons who, pursuant to an agreement or understanding (whether formal or informal), actively cooperate, throught the acquisition by any of them of shares in a company, to obtain or consolidate control of that company

Added value

A private equity management team’s exceptional experience, know-how or valuable business contacts which constitute a vital input for the growth of investee companies.

Adjustable rate preferred stock

Preferred stock whose dividend rate changes in response to changes in a reference interest rate.

Adjusted Present Value Model

This model is similar to the Enterprise DCF model, with the difference that the Adjusted Present Value model separates the value of the company into two components: the value of the company’s operations at the cost of capital as if the company had no debt, plus an additional element reflecting the impact on this value of the tax savings related to leverage.

Allocation

The number of securities assigned to an investor, broker, or underwriter in an offering.

Alternative Investment Market (AIM)

The London Stock Exchange’s market for new, fast growing companies. AIM offers the benefit of operating both an electronic quote and order trading facility. It commenced trading in June 1995.

See London Stock Exchange (LSE)

Alternative investments/assets

Investments covering amongst others private equity and venture capital, hedge funds, real estate, infrastructure, commodities, or collateralised debt obligations (CDOs).

Alternext

Created by Euronext in April 2005, Alternext is a unregulated stock market dedicated to small and mid-cap companies.

American Stock Exchange (AMEX)

A securities market which generally listed securities of smaller or newer companies. In October 1998, Nasdaq and the AMEX combined into one corporate organisation: the Nasdaq-AMEX Market Group.

Analyst

A research analyst usually employed by an bank to ‘follow’ a company and issue reports on the condition and prospects of the company and of its securities. The quality and reputation of an investment bank’s analyst will often be a key component in selecting an underwriter, as analyst coverage of the company before and after the flotation helps to generate and maintain interest in the company’s securities.See underwriter.

Anchor LP

An investor in a private equity/venture capital fund that commits a significant amount of the total fundraising to the fund upfront.

Angel financing

Capital contributed by an independently wealthy private investors.

See business angel.

Anti-dilution (full ratchet)

Anti-dilution provisions in which the price at which the anti-dilution instruments are converted is the lowest price at which ordinary shares have been sold.For example: in a prior round of financing which raised capital at €2.00 per share, investors received full ratchet anti-dilution protection. A subsequent round of financing was consummated at €1.00 per share, and the early round investors therefore had the right to convert their anti-dilution instruments at the lowest (ie €1.00) price.

See anti-dilution provisions, anti-dilution (weighted average), blank cheque preferred stock, poison pill, shark repellent.

Anti-dilution (weighted average)

Anti-dilution provisions in which the price at which the anti-dilution instruments are converted is calculated by a weighted average formula.For example: in a prior round of financing which raised €1 million of capital at €2.00 per share, investors received weighted average anti-dilution protection. A subsequent round of financing was consummated for another €1 million at €1.00 per share, and the early round investors therefore had the right to convert their anti-dilution instruments at a weighted average adjusted price of €1.50 per share.

See anti-dilution provisions, anti-dilution (full ratchet), blank cheque preferred stock, poison pill, shark repellent.

Anti-dilution provisions

Provisions in a company’s charter and by-laws designed to discourage undesired take-over bids. These take the form of options or institutional equity instruments (eg convertible preference shares), which can be converted to ordinary shares on any issue of new stock in a subsequent round of investment financing or in a take-over bid. The price at which this conversion takes place is determined by the type of anti-dilution provision.See anti-dilution (full ratchet), anti-dilution (weighted average), blank cheque preferred stock, poison pill, shark repellent.

Arm’s-length

The relationship between persons (whether companies or not) who deal on a purely commercial terms, without the influence of other factors such as: common ownership; a parent/subsidiary relationship between companies; existing family or business relationships between individuals.

Arrearage

Unpaid dividends due to holders of preferred stock.

See Cumulative preferred stock.

Asset allocation

A fund manager’s allocation of his investment portfolio into various asset classes (eg stocks, bonds, private equity).

Asset class

A category of investment, which is defined by the main characteristics of risk, liquidity and return.

Asset cover

One of the indicators used by banks to calculate debt ceiling. It is the extent to which debt is secured against the company’s assets. Banks apply different weighting factors to various classes of asset, depending on their liquidity and the typical reliability of the valuation.

Asset deal

A sale of assets not essential for the vendor’s core business.

Compare Share deal.

Asset purchase agreement

Agreement further to which one or more purchasers buy assets and take on certain liabilities (related to the purchased assets) from one or more sellers. The agreement will set out/forth the details of the sold assets and the transferred liabilities, the representations and warranties, the indemnification in the event of misrepresentation, the required approvals and actions in order for the transfer of the assets and liabilities to be valid and/or effective towards third parties. It usually includes post-closing covenants (such as the obligation for the sellers to continue to service the obligations of which the transfer cannot, cannot easily, or is deliberately not to, be enforced on the creditors and other third parties to the transfer).

Asset stripping

Dismantling an acquired business by selling off operational and/or financial assets.

Auction

A process in which an investment bank invites several private equity houses to look at a particular company that is for sale and to offer a bid to buy it.

Average IRR

The arithmetic mean of the internal rates of return (IRRs).

See Internal rate of return (IRR).