Private equity firms are entities formed by investment professionals who deploy capital on behalf of individual and institutional investors, such as public pension funds, ERISA plans, hedge funds, and high net worth individuals. These types of investors can typically commit large sums of money for significant periods of time. Private equity law involves negotiating, structuring, and documenting a variety of transactions including fund formations, venture capital investments, control acquisitions of public and private companies, and dispositions of previously acquired companies or investments.
In addition to forming investment vehicles, private equity law encompasses a wide range of legal matters for companies owned by private equity firms, known as “portfolio companies.” Private equity firms turn to their counsel to assist their portfolio companies with “bolt-on” acquisitions, capital raising transactions, leveraged recapitalizations (often to fund dividend payments), and dispositions of the portfolio companies.
Private equity law also includes representing investment groups in acquisition transactions funded by debt, which are known as “leveraged buyouts.” These transactions can be highly complex, as, in parallel with the negotiation and documentation of the acquisition transaction itself, the private equity firm concurrently must negotiate and document a complex debt transaction, which can involve multiple lenders and several layers of financing.
The issues presented to private equity and leveraged buyout lawyers are manifold, and typical arise during the course of fast-moving, highly complex transactions involving numerous counterparties, such as debt financing sources, other equity investors, management, and the private equity firm’s own constituents. These transactions can require a working familiarity with corporate law, partnership law, tax, benefits and employment law, environmental, intellectual property and real estate issues in a transactional context, executive compensation and incentive issues, securities law, and complex debt financing issues. Beyond the substantive legal issues that arise, the private equity lawyer must be able to organize, articulate, and harmonize multiple parallel workstreams, communicate among widely disparate transaction participants (principals, legal specialists, lenders, accountants, investment bankers, and transaction counterparties), and keep all of those pieces on track and coordinated for closing.