Whenever an acquisition is signed on one date and closed on another date, there will be a need for covenants to protect the purchaser(s) from certain acts that the seller(s) could do during the period from signing to closing, and vice versa.1As a general rule, the covenants given by the seller(s) to the purchaser(s) will be more onerous than the covenants given by the purchaser(s) to the seller(s), since the seller(s) will retain control of the target company until the transaction closes.…

The majority of private equity transactions are structured with a deferred closing, i.e. the parties will sign the relevant transaction documents on a specific date then consummate (“close”) the transaction by paying the purchase price and transferring the asset at some later date.1The reason for this is simple: a private equity transaction will require the parties to obtain—without limitation—third party financing, various regulatory approvals, third party consents, and corporate governance approvals.…

What function do the indemnities serve? When a contractual clause is breached, the injured party will have a right to bring a legal action against the breaching party, and the court will determine the appropriate quantum of damages to be paid by the breaching party. The problem with letting the court determine the quantum of damages is that it leaves both parties uncertain of what their maximum exposure post-closing will be.…

This post will by no means be comprehensive. To write a comprehensive account of representations and warranties would require writing a book; I do not intend to do so at this time. This post will serve to highlight some of the key issues that a private equity professional ought to understand about representations and warranties in an acquisition agreement, and examine some salient representations and warranties in greater detail.…

The acquisition agreement provisions relating to the purchase price are some of the most complex and heavily negotiated provisions in a private equity acquisition agreement. While almost every private equity transaction will be paid for in cash–thereby obviating the need to negotiate over whether the purchase price will be paid in cash, stock of the purchaser(s), or some combination thereof—the seller(s) and purchaser(s) will nevertheless spend a lot of time negotiating over the quantum and any adjustments thereto, the timing, and the existence of any post-completion earn-outs for the seller(s).…

I’ll start this series by providing an overview of the acquisition agreement (also referred to as a purchase and sale agreement, share purchase agreement, or sale and purchase agreement). This post will cover the purpose of the acquisition agreement, often abbreviated as SPA, and the key sections within the SPA. I will not explore any section in detail in this post; rather, I want to show how all the pieces fit together before delving into any section.…

More pertinent, why should a fund sponsor care? The short answer, is “because prospective limited partners care”. A fund’s tax structuring is often the subject of fairly extensive due diligence and negotiation by prospective limited partners, and in extreme situations where the fund sponsor cannot accommodate a prospective investor’s tax structuring requirements can result in that investor declining to make an investment.…

The starting point for the sale of securities—broadly defined to include equity and debt instruments, investment contracts, certificates of deposit, securities index, participation rights in a profit-sharing agreement, interests in mineral rights, derivatives, and interests in investment funds howsoever organized1—in the United States is the prohibition in the SAon offering or selling any security sold using the instruments of interstate commerce unless such security is registered with the SECor is exempted from registration.…

In light of a few conversations that I have had with various people who are interested in this space, I thought it would be good to write a brief overview of the categories of investors that a fund sponsor will typically seek to be LPs in their fund. It will serve as a primer to some of the considerations—including some legal considerations arising from the Investment Advisers Act of 1940(the “AA”) and the Investment Company Act of 1940(the “ICA”)—that anyone involved in the industry ought to consider when dealing with fundraising for a PE/VCfund that is subject to U.…

The practice certainly still seems very widespread and not just among private equity sponsors, if the data the Bloomberg article cites is true: Data gathered by Xtract Research show that 77 percent of all loan deals in the third quarter included provisions giving borrowers the ability to block individual lenders, up from 51 percent at the end of last year.…