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.…

Recently, while taking Professor David Wessels’ excellent Venture Capital and the Finance of Innovation, I was reminded of one of the fund terms that often ended up being carefully scrutinized and negotiated by limited partners: the recycling provision. I’ve seen various forms of recycling provisions in practically every post-2008 vintage private equity, real estate, infrastructure, and venture capital fund that I have seen in the six years that I worked with Partners Group’s fund-of-funds arm; I would go as far as to call them pretty much ubiquitous in the industry.…

It is now the second week of 2016. 2016. It seemed so far away, when I left the industry to begin my MBAat Wharton. I’ve recently had the pleasure of discussing the state of the private equity industry with a few industry participants whose opinions I respect. These discussions have crystalized a number of thoughts on the state of the private equity industry as we enter 2016.…

First, it is important to note that the liquidation preference is not just a tool of venture capitalists. It shows up in growth capital private equity as well. There are a number of good resources that have described the liquidation preference, including a blog post by Brad Feld, a post on Venture Beat, and a blog post by Ryan Roberts at Startup Lawyer.…

Many private equity, real estate, and infrastructure fund sponsors offer co-investment opportunities to limited partners in their funds. The practice of offering co-investment opportunities to limited partners has been an accepted part of the industry since well before I joined it in 2008.1The appetite for co-investments among limited partners—particularly certain large and sophisticated institutional investors with the resources to build in-house direct investment expertise—has grown significantly since the 2008 global financial crisis.…