REFERENCE · Last updated 2026-07-24 · Shen Pandi
Private equity glossary
This private equity glossary defines the terms sponsors, LPs, and operators use when raising funds, underwriting buyouts, measuring returns, and — increasingly — governing AI deployment across portfolios.
- Search filters the full list of sixty-plus terms instantly.
- Return metrics (IRR, MOIC, DPI, TVPI) are related but not interchangeable.
- For narratives, pair definitions with the LBO and IRR vs MOIC guides.
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Type any fragment — e.g. "carry", "DPI", or "inference". Showing 98 of 98 terms. New to the asset class? Start with what is private equity?
Add-on acquisition
A bolt-on purchase by a platform company already owned by a PE fund, intended to create scale, capability, or geographic density.
AUM
Assets under management — the capital a firm manages across funds and vehicles, reported under varying industry conventions.
Bridge loan
Short-term financing used to close a deal before longer-term capital is in place.
Buyout
A control-oriented acquisition of a company, often financed with a mix of equity and debt.
Capital call
A GP request that LPs fund a portion of their commitment for investments or expenses.
Carried interest
The GP’s share of fund profits above the hurdle, commonly around 20%, subject to the waterfall.
CIM
Confidential information memorandum — the marketing document describing a company in a sale process.
Clawback
A provision requiring GPs to return carry if early distributions later prove excessive relative to overall fund results.
Closed-end fund
A fund with a finite life that does not continuously accept redemptions like an open-end vehicle.
Club deal
A transaction where multiple PE firms co-invest alongside each other as a consortium.
Commitment
The total capital an LP agrees to provide to a fund over its investment period.
Continuation vehicle
A secondary-style vehicle that holds one or more assets beyond a main fund’s exit timeline.
Control equity
An ownership stake sufficient to direct the board and major decisions of a portfolio company.
Co-invest
LP capital invested directly in a deal alongside the main fund, often at reduced or zero management fee/carry.
Data room
A secure repository of documents provided to buyers during due diligence.
Deal flow
The stream of potential investment opportunities a firm sees.
Debt multiple
Leverage expressed as debt divided by EBITDA (or similar), used in underwriting and covenants.
Distribution
Cash or stock returned from a fund to LPs after realizations or refinancings.
DPI
Distributions to paid-in capital — cumulative distributions divided by capital contributed.
Dry powder
Committed but undeployed capital available for new investments.
Due diligence
The investigative process of verifying a target’s commercial, financial, legal, and operational reality before closing.
EBITDA
Earnings before interest, taxes, depreciation, and amortization — a common operating profit proxy in PE.
Enterprise value
Equity value plus net debt (and sometimes other adjustments) — the total firm value.
Entry multiple
The valuation multiple paid at acquisition, often EV/EBITDA.
Evergreen vehicle
A structure without a traditional fixed termination date, recycling capital over time.
Exit
The sale, IPO, or other realization event that monetizes a portfolio investment.
Follow-on investment
Additional capital invested into an existing portfolio company after the initial deal.
Fund of funds
A vehicle that invests primarily in other PE funds rather than directly in companies.
General partner (GP)
The manager of a PE fund responsible for investing and operations, earning fees and carry.
Gross IRR
Internal rate of return before fund-level fees and carry (definitions vary — always check the footnote).
Growth equity
Minority or shared-control capital for scaling companies, typically with less leverage than buyouts.
Hurdle rate
The preferred return LPs receive before the GP takes full carry, often around 8% in buyout funds.
IC
Investment committee — the body that approves deals for a firm or fund.
IOI
Indication of interest — an early, non-binding expression of valuation and structure.
IRR
Internal rate of return — a time-weighted annualized return metric based on cash-flow timing.
J-curve
The pattern where PE fund net returns look weak early (fees, undeployed capital) before realizations improve them.
Key person
A contractual clause tied to named professionals whose departure can pause investing or trigger rights.
LBO
Leveraged buyout — an acquisition financed partly with debt secured against the target’s cash flows.
Limited partner (LP)
An investor in a PE fund that commits capital and typically has limited governance rights.
LOI
Letter of intent — a (often largely non-binding) document outlining proposed deal terms.
LPA
Limited partnership agreement — the core legal contract between GP and LPs.
Management fee
Ongoing fee paid to the GP for managing the fund, often a percentage of commitments or invested capital.
Management presentation
A meeting where target management presents the business to prospective buyers.
MOIC
Multiple on invested capital — total value divided by capital invested, ignoring timing.
NAV
Net asset value — the estimated value of fund assets minus liabilities.
Net debt
Interest-bearing debt minus cash, used in enterprise-value bridges.
Net IRR
IRR after fees and carry — closer to what LPs experience, subject to reporting conventions.
Platform company
The initial company in a roll-up strategy to which add-ons are attached.
Portfolio company (portco)
A company owned by a PE fund.
Preferred return
See hurdle rate — the LP return threshold before full GP catch-up/carry.
Proprietary deal
An opportunity sourced outside a broad auction, often via relationships.
QoE
Quality of earnings — an analysis of how sustainable and accurately presented earnings are.
Recap
Recapitalization — reshaping the capital structure, sometimes returning capital to owners via new debt.
Roll-up
A strategy of consolidating fragmented businesses through repeated add-on acquisitions.
Secondary
A transaction where an LP sells a fund interest, or a firm sells assets into a continuation vehicle.
Sponsor
Colloquial term for the PE firm leading a buyout.
Subscription line
A credit facility secured by LP commitments, used to smooth capital calls.
Take-private
Acquiring a public company to delist it and operate under private ownership.
Teaser
A short anonymous overview used to solicit buyer interest before a CIM.
TVPI
Total value to paid-in — (distributions + remaining NAV) / paid-in capital.
Underwriting
The process of modeling returns, risks, and value-creation plans to support an IC decision.
Value creation plan
The operating and strategic agenda owners intend to execute during the hold.
Vintage year
The year a fund begins investing; used to compare performance across cycles.
VDD
Vendor due diligence — seller-commissioned diligence packs provided to buyers.
Waterfall
The contractual order of distributing proceeds between LPs and GP (including catch-up and carry).
Working capital peg
A target working-capital level used to adjust purchase price at closing.
Write-down / write-up
A reduction or increase in the carrying value of an investment before exit.
100-day plan
The intensive post-close agenda for the first roughly three months of ownership.
AI inference
The production use of a trained model to generate outputs; a recurring cost center in AI-enabled portcos.
Quality floor
The minimum evaluation score a model must clear before it may serve a workload in a routing policy.
Affiliate
A related entity under common control; often relevant in fee, conflict, and related-party analyses.
Anchor LP
A large early investor whose commitment helps a fundraise reach critical mass.
Bid process / auction
A competitive sale process run by advisors with multiple rounds of bids.
Bolt-on
Synonym for add-on acquisition attached to a platform company.
Catch-up
The waterfall step that accelerates GP carry after LPs receive the preferred return, until the target split is reached.
Covenant
A contractual restriction or test in loan documents (e.g., leverage or interest coverage).
Deal team
The investment professionals originating, underwriting, and monitoring a transaction.
Dividend recap
A recapitalization that pays a dividend to owners, typically funded with new debt.
Earnout
Deferred purchase consideration contingent on post-close performance.
Equity contribution
The cash equity a PE fund (and sometimes management) invests at closing.
Exit multiple
The valuation multiple assumed or realized at exit, often EV/EBITDA.
Fundraising
The process of marketing a fund strategy and securing LP commitments.
GP commit
Capital the general partner invests alongside LPs to align incentives.
Hold period
The time between acquisition and exit for a portfolio investment.
Investment period
The window during which a fund may make new platform investments under the LPA.
Leverage
Debt used to finance an acquisition or operations; amplifies equity returns and risk.
Management rollover
Equity that management reinvests into the new capital structure at closing.
Mid-market
A PE segment targeting companies smaller than mega-cap buyouts, with varying size definitions by firm.
Operating partner
A PE professional focused on portfolio value creation rather than pure deal execution.
Paid-in capital
Capital actually contributed by LPs to date (distinct from undrawn commitments).
Portco AI ops
Shared practices for deploying, evaluating, and governing AI workloads across portfolio companies.
Primary commitment
An LP commitment to a new fund at fundraising (vs buying a secondary interest).
Realization
An event that converts an investment into distributable proceeds.
Sponsor-to-sponsor
A sale of a portfolio company from one PE firm to another.
Token economics / FinOps for AI
Unit-cost management of model inference (and related cloud) spend across use cases and vendors.
Unitranche
A single-tranche loan structure combining features of senior and subordinated debt.
Value bridge
A walk from entry to exit equity value attributing EBITDA growth, multiple change, and net debt.
Warehouse facility
Financing used to hold assets before they are transferred into a fund or securitized structure.
How to use these definitions
Glossary entries are starting points, not legal advice. Fund documents define fees, hurdles, and waterfalls with precision that a sentence cannot capture. For mechanics, read the leveraged buyout guide and IRR vs MOIC. For process, see due diligence. For the 2026 operating layer, see AI in private equity.