Sweet equity Definition

GLOSSARY

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What does Sweet equity mean?

This refers to the managers’/management’s holding of ordinary share capital in a company. The expression is used and the scenario is often found in situations where a company is subject to private equity investment pursuant to a management buyout. Its name reflects the fact that the shares allocated to management are meant to act as an incentive to them, are often subscribed for at a lower price than the private equity fund investor’s shares, ie with a higher upside and are normally designed to divert more of the total equity proceeds on exit to management.

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Private equity financing—equity

Private equity financing—equity The way in which a private equity investment is structured and the terms and conditions of the investment will vary in nature and complexity depending on the type and size of investment. Other key issues for a private equity investor will usually include: • allowing management to run the business but with the investor retaining full access to management, the business records and other information • the ability to take control of the management of the business if necessary, and • exiting the investment for a profit (measured as an internal rate of return (IRR) or investment multiple) usually after three to five years (see Practice Note: Private equity investment—firms and funds) Broadly this will be achieved by a combination of careful structuring of the investment and clarity in the equity documentation as to the rights and obligations of all parties. It is important that, at the outset, all parties take tax advice on the structure and proposed investment generally, as even slight variations can...

Private equity and venture capital—glossary of terms

Private equity and venture capital—glossary of terms A Accelerated depreciation Accelerated depreciation is the set of HM Revenue & Customs rules that allow businesses to deduct from their taxable income the declining value of business-related investments ie equipment and machinery, faster than the value of those assets actually declines. The most common types of accelerated depreciation are 'sum of the years digits' and 'double declining balance'. Acquisition The process of acquiring a controlling interest in another company or any deal where the bidder ends up with 50% or more of the company taken over. Acquisition finance A source of external finance obtained by the acquiring company to fund an acquisition. This can be in the form of bank debt and/or equity, such as a share issue. Alternative investment fund (AIF) Any collective investment undertaking, including investment compartments of an AIF, that raises capital from a number of investors with a view to investing it in accordance with a defined investment...

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Share Incentives weekly highlights—2 November 2023

This week's edition of Share Incentives weekly highlights includes: (1) further analysis of the Supreme Court’s decision in Vermilion, (2) confirmation of amendments to the Takeover Code, and (3) a letter from the FCA to chairs of remuneration committees.

Latest market trends and developments in the private equity buyout sphere

Corporate analysis: Chris Hale, chair emeritus and senior consultant, and Adam Orr, partner and head of the management advisory group, both of Travers Smith explore current trends and recent developments in the UK’s private equity (PE) buyout sphere.

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