Equity Stake

The ownership stake held by a company's founders, typically established at incorporation and subject to dilution through subsequent funding rounds. Founders' equity is usually subject to vesting schedules and may carry different rights from investor shares, reflecting the intangible contribution of the founding team's vision and early-stage effort.

Investment capital provided to companies that are not listed on a public stock exchange, or used to take public companies private. PE firms typically acquire controlling stakes in mature businesses, apply operational improvements, and seek exits within 3-7 years.

Net income divided by shareholders' equity, measuring the return generated on owners' invested capital. High ROE can indicate efficient use of equity but should be interpreted alongside leverage levels and the quality of earnings.

A style of private equity investment focused on mature, profitable, or near-profitable companies seeking capital to accelerate expansion without ceding majority control. Growth equity investors typically target businesses with proven product-market fit and strong intangible asset bases, providing capital for scaling operations, entering new markets, or funding acquisitions.

The incremental return that investors require for holding equities over risk-free government bonds, reflecting the additional risk associated with equity ownership. The ERP is a critical input to cost of equity estimation under both CAPM and build-up methods.

The value attributable to the shareholders of a business after deducting all debt and debt-like obligations from enterprise value. Equity value represents what the owners would receive if the business were sold and all liabilities settled.

A detailed register of a company's equity ownership structure showing all shareholders, their percentage ownership, share classes, options, warrants, and the dilutive effect of each financing round. A clean cap table is essential for fundraising and exit readiness.

A legally binding contract between a company's shareholders that governs their rights, obligations, and the rules for key decisions including share transfers, board composition, dividend policy, and exit mechanisms. Essential governance infrastructure for investor-backed companies.

What is a cram down and why are they used in distressed financings?

A cram down forces existing shareholders to accept new investment terms (often at a punitive valuation) to fund operations, used when a company is out of capital and has few alternatives.

What is pari passu and how does it affect investor rights?

Pari passu means investors hold equal ranking in liquidation or dividend priorities — no investor class has preference over another, protecting minority investors from founder dilution.

How much of a company's value is intangible?

For S&P 500 companies, over 90% of market capitalisation is attributed to intangible assets. For typical SMEs, the proportion ranges from 50-85% depending on the industry and business model.