Equity

The equity contribution as a proportion of the whole will depend on prevailing market conditions. It will also depend on how much equity the sponsor is able or willing to deploy, sponsor IRR targets, the strength and desirability of the target business and the cash flows it is expected to generate. This guidance note describes the following typical types of equity contribution (assuming, for present purposes, that Holdco or Topco is a company, not eg a unit trust):

• • true equity in the form of ordinary share capital; and
• • quasi-equity in the form of subordinated shareholder loans or, less frequently, some other form of capital investments such as, eg redeemable preference shares.

See Equity.