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Stock Purchase Agreement Series — Covenants

Having discussed purchase price adjustments, representations and warranties, indemnities, and closing conditions, I now turn to the last of the main sections of an acquisition agreement, the covenants. 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.…

Stock Purchase Agreement Series — Closing Conditions

The closing conditions. The acquisition agreement for most private equity transactions will have, in addition to the bespoke representations and warranties, indemnities, and covenants, a raft of closing conditions. I suspect that a chapter, at least, would be necessary to do justice to this area of the acquisition agreement, but in the interest of brevity, I will confine myself to just one post.…

Stock Purchase Agreement Series — Indemnities

After navigating the minefield of the representations and warranties, you might be convinced that we have, like Odysseus, reached the shores of Ithaca. Nothing could be further from the truth. We now come to the next heavily negotiated part of the acquisition agreement: the indemnities. What function do the indemnities serve?…

Stock Purchase Agreement Series — Representations and Warranties

The representations and warranties contained in an acquisition agreement are a minefield, and you, my good reader, are the unfortunate sniffer dog being sent into the minefield to locate the mines. It is often the longest section of an acquisition agreement, and the content and the scope of the representations and warranties are extensively negotiated between counsel to the purchaser(s) and seller(s), as well as between the purchaser(s) and seller(s).…

Stock Purchase Agreement Series — Purchase Price

Negotiating purchase prices for private equity transactions can be an experience rather similar to being in a boxing ring. They are also often the subject of very lengthy and complex legal language in the acquisition agreement. 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.…

Stock Purchase Agreement Series — Overview

The acquisition agreement is one of the most important transaction documents in a private equity deal. It is long, verbose, and difficult to understand without the benefit of years of deal experience. In light of my six years of experience doing deals in Asia and Europe, and in the spirit of Brad Feld’s excellent series of blog posts on term sheets, I’ve decided to write a series of blog posts on the acquisition agreement.…

U.S. Tax Treatment of Limited Partners

Fund structuring is often complicated by the myriad rules and regulations promulgated by the IRS and other tax authorities. It can, for the uninitiated fund sponsor, be a proliferation of unfamiliar acronyms and arcane section references: CAI CFC, ECI, FIRPTA, PFIC, QEF, Section 892, UBIT, UBTI… What do these acronyms and section references mean?…

Thoughts on Regulation A+

On March 25, 2015, the SEC released its final amendments to Regulation A under the Securities Act of 1933 (the “SA”), which implements Title IV of the Jumpstart Our Business Startups Act (the “JOBS Act”). As I had already written my thoughts on the implementing regulations for Title III of the JOBS Act, it seems fitting to bring the same analysis to the newly promulgated Regulation A+.…

Limited Partners

As I previously mentioned, a private equity or venture capital fund is a pool of capital provided by investors, typically called limited partners (LPs) in light of the fact that private equity and venture capital funds are often structured as limited partnerships. Understanding who LPs are and what they want is important for any fund sponsor that wishes to raise a fund, because LPs are, in the immortal words of the exquisite Vesper Lynd, the money.…

Blacklists in Leveraged Loans

Bloomberg recently ran an interesting article about the practice of “blacklisting” certain institutional investors from acquiring positions in leveraged loans. These “blacklists” are often baked into the facility agreements (the agreements between lenders and borrowers specifying their respective rights and obligations), and will restrict the sale of debt in the secondary market to persons on the blacklist, thus shutting them out of the market for such debt until the maturity of the debt.…