SPV (special purpose vehicle)

Definition

A company formed to hold one acquisition and nothing else besides it.

Why It Matters

It is how gap equity usually arrives in a self-funded deal: rather than ten investors on the operating company's cap table, they subscribe to one entity that owns the shares, which keeps the lender underwriting a single clean borrower and keeps the searcher managing one investor relationship instead of ten. It also sets where the waterfall lives and who signs what at closing.

In numbers: Nine investors put $300,000 into an SPV that holds the buyer's equity; the lender sees one borrower and one guarantor rather than a cap table it would have to diligence.