|
Aftermarket |
The period following the start of dealing in shares which have been
newly issued on a stock market |
|
Allocation |
A method by which shares are divided between investors (in a flotation
or secondary sale of shares) |
|
Assets |
Anything, physical or otherwise, including intellectual property, owned
by a business |
|
Auction
|
Public sale at which businesses are sold to the person making the
highest bid
|
| Benchmarking |
The search to find and
implement good practice through comparing the performance of an
organisation with that of others. |
|
Benchmark Valuation |
A pre-sale valuation of a business prepared by or on behalf of the
vendor |
|
Bookbuilding |
Indications from investors of the numbers of shares at different prices
they would be willing to purchase |
|
Business |
An enterprise, private company, partnership, or individual carrying out
commercial or industrial undertakings |
|
Capital Market |
A market, for example in a stock exchange, through which funds are
obtained for investment. A potential bidder will often need to obtain
financial backing in a capital market before making a major bid in a
privatisation |
|
Clawback |
Terms of sale enabling the vendor to receive, in defined circumstances,
a proportion of any subsequent profit made by the purchaser after sale -
for example following the disposal of surplus land or other assets, or if
the purchaser disposes of the business |
|
Command Economy |
An economy in which the most important financial and industrial
interests are controlled by the state |
|
Commercialisation |
A process in which a state-owned business is put on a more market
orientated footing while remaining wholly or partially in the public
sector |
|
Competitive Tension |
A process by which the existence of two or more competitive bids can
lead to the vendor benefiting from higher proceeds because of the
competition between these bids |
|
Concessions
|
The private sector is permitted to provide and charge the public for
services which would normally be provided by the state, in return for a
fee. The private sector will usually provide finance to build the
necessary infrastructure, such as a bridge or road.
|
| Contracting Out |
A process, usually following
competition, by which a government body pays a private provider to deliver
a service, either to itself (e.g. the maintenance of public buildings) or
to the public (e.g. collecting household waste). |
|
Corporate Governance |
The system by which businesses are run. This includes the director's
duty to ensure that the business is properly and honestly managed |
|
Deliverable
|
The service or product to be provided by the contractor.
|
| Discount Factor |
A means of calculating the
present value of future costs and revenues> |
|
Downsizing |
A reduction in the staffing requirements of businesses which can follow
after privatisation for a variety of reasons such as competitive pressures
or the need to increase the profitability of the business by cutting costs |
|
Due Diligence |
A process by which the bidders verify if the facts and assumptions made
at the time of their bids are accurate at the time the sale is completed |
|
Equity
|
That part of a company’s capital belonging to its shareholders
|
| Economic regulation |
The exercise by the state,
either directly or indirectly, of control and influence over suppliers of
services to consumers. Regulation covers both privately and publicly owned
suppliers and seeks to protect the interests of public consumers. |
|
Flotation
|
The sale to individuals, financial institutions or private sector
businesses of shares which can then be traded on a stock market
|
|
Financial model |
Spreadsheets designed to
show the financial outcome of a particular set of estimated costs,
revenues and fixed and capital charges for delivering a service over time |
|
Framework agreement |
A contract over a particular
period where the consultant or contractor is guaranteed regular pieces of
work without the need for competition, provided they can demonstrate that
they provide value for money. |
|
Franchise |
The private sector is
permitted to provide and charge the public for services which would
normally be provided by the state, in return for a fee. |
|
Global co-ordinators
|
Financial institutions which co-ordinate the marketing of an
international share offer
|
| Gross domestic product |
The total value of goods
produced and services provided in a country in one year. |
|
Indemnities |
Conditions of sale by which a vendor agrees to pay costs incurred by
the purchaser if certain events stipulated in those conditions occur |
| Intermediaries |
Agents representing the
interests and acting on behalf of individual investors in privatised
businesses |
| Invitation to tender
(ITT) |
A formal communication to
selected suppliers inviting them to submit bids for a contract |
| Joint venture |
A jointly owned company set
up by private and public sectors to complete a project which brings
benefits to both parties |
|
Liabilities |
Costs which may be incurred after the sale of a business. They are
either transferred to the purchaser or retained by the state. |
|
Management and Employee Buy-out |
Sale of the business to its management and/or employees, giving them
control of the future direction of the business.
|
|
Market Economy |
An economy where key elements in the financial and industrial sectors
are owned by private corporations rather than by the state |
|
Marketing
|
A process by which the vendor attracts bidder/investor interest in the
sale of assets or the contract to be awarded.
|
| Market Domination |
Where a supplier has a major
share of the market. |
|
Market Stabilisation
|
A process by which, for a specified period following a flotation or
secondary sale of shares, the government supports the issue price
|
|
Market Testing |
Private companies are
invited to tender for a contract to provide public services, in
competition with the existing public sector provider
or
Discussions with industry or experts to see if there are organisations
likely to bid enthusiastically for a contract before it is offered to the
market. |
|
Mass Privatisation |
Arrangements differ between countries, so there is no single
definition. Broadly speaking however the term refers to a programme of
widespread privatisation, which may include the broad participation of the
public as investors, and is often part of a rapid move away from a command
economy towards a more market orientated economy |
| Mixed Economy |
An economy in which
ownership of some key elements in the financial and industrial sectors
resides in the state and other key elements are in private hands |
| Monopoly |
Where the market has only
one supplier. |
|
Objective |
General statement of the service required. Comprises the deliverables,
cost limits, risk transfer and benefits sought
|
| Output specification |
The customer's service
requirements and minimum acceptable quality standards to which bids must
conform. This information will be sent to all parties bidding for a
contract. |
|
Partnering |
The situation where a public organisation and a
private one work together to provide a service with some sharing of risk
and reward, usually over a period of time |
| Performance Audit |
An independent examination
of how economically, efficiently and effectively the audited body has
carried out its tasks |
|
Preferred Bidder |
The bidder who is selected by the vendor as being the party to whom it
intends to sell the business, or award a contract, subject to the
completion of negotiations and legal arrangements |
| Premium |
The amount by which newly
issued shares are traded on the stock market above the share issue price |
| Pre-qualification |
The process by which bidders
demonstrate that they have the technical skills and financial resources to
carry out the services the customer requires. |
|
Privately financed investment projects |
A private company obtains
the funds to design, construct / refurbish and operate/maintain a public
asset such as a hospital. Once the asset is operating a regular fee is
paid by the public sector for a set period (usually 20-35 years). At the
end of this period, the asset reverts to public ownership. |
|
Privatisation
|
Transfer by central or local government of a business and its assets
from state to private ownership
|
|
Public Sector Comparator |
An estimate of what the
project would cost if traditional procurement methods were used. This is
used to determine whether private finance offers better value for money
than traditional procurement |
|
Rate of return |
The price paid to lenders
and investors for the use of their money. |
|
Reserve bidder |
Second place short-listed bidder. Reserve bidders may be invited to
keep their bid on the table in order to maintain competitive pressure on
the preferred bidder. |
|
Residual Management |
The management of any remaining responsibilities or liabilities by the
state following the sale of the business or the contracting out of a
service. |
| Restructuring |
A process in which the
vendor prepares the business for sale |
|
Retail Market |
The market for individual investors in a flotation |
| Risk |
Hazard, danger, chance of
loss or injury, the degree of probability of loss; a person, thing or
factor likely to cause loss or danger |
| Risk Allocation |
The agreement between the
parties to a public/private finance deal which defines which party is
responsible for: a) minimising the chance that a particular adverse event
should arise, b) for mitigating the impact of that event if it does arise,
and c) or bearing the financial or other consequences of that event
occurring. |
|
Risk level |
An assessment of the
significance of the risks to be assumed by a party. It combines the impact
of likelihood of a given risk arising with the impact of that risk. |
|
Risk transfer |
The passing of risk normally
borne by the customer to the service provider |
|
Sensitivity testing
|
Test of the impact on the value for money of bids if key assumptions
(such as the likely demand for a service) change.
|
|
Success Fees |
Fees charged by advisers on a privatisation or public/private
partnership where a bonus is paid if the transaction being completed or a
contract being signed
|
|
Supplier
|
A regulated business licensed to provide a specified service to
consumers.
|
|
Taxpayers |
The citizens of a country, whose taxes have been invested in state
owned businesses |
|
Trade Sale
|
Direct sale of a business in state ownership to another business. This
includes joint ventures and part sales
|
| Traditional procurement
|
A contract in which the customer pays the contractor
for the provision of an asset as work in constructing / developing this
asset progresses. Such assets are fully paid for on their completion. The
maintenance of these assets are dealt with in separate contracts, while
their operation remains the responsibility of the public sector |
| Tranche Sale |
A part sale of a business in
a flotation |
|
Underwriters
|
Financial institutions which agree, in advance, in return for a fee, to
buy unsold shares in a flotation
|
| Utility |
The supply of basic services
such as water to consumers. |
|
Vendor |
The legal entity (representing the state) which owns the business being
privatised |
|
Voucher
|
Document which can be exchanged for shares in a privatised business or
for shares in a fund which holds shares in a privatised business
|
|
Value for Money |
The combination of cost
(over the whole life of a project) and quality which best meets an
organisation’s requirements. |
|
Warranties |
Provisions in a sale agreement through which the vendor guarantees
certain matters to the purchaser about the business being sold |
