At the BVA, we apply the terminology developed by EVCA. This means that we use the term private equity in the broadest possible sense. Therefore, private equity includes the segments venture capital, development capital and buy-outs.
Private equity uses different types of instruments when investing or acquiring businesses. The most used instruments are equity or quasi-equity instruments. Equity instruments are typically shares and quasi-equity are securities which are convertible into equity.
Some segments of private equity, in particular buy-outs, also use debt instruments to finance their acquisitions. There, a distinction is made between unsecured and secured debt. In unsecured debt, the loans are not secured on the company’s assets where in secured debt, the loans are secured on the company’s assets.
Mezzanine is another instrument and it is a kind of loan finance that is halfway between equity and secured debt.