Private Equity

For many years the approach from private equity has been “if you play with our money you play by our rules” and quite frankly we have assisted those in organisations setting up their rules.

However in more recent times we have seen a shift in the relationships and in our experience, private equity is now using funds available in long term viable business rather than simply short term cash cows.

Funding from a private equity or venture capital investor will always be conditional upon their taking an equity stake in the company. The provision of funds can come with access to stronger management and opportunities to maximise expertise and the business itself.

We have seen the use of private equity as both a management tool to achieve growth and have also seen a sensible approach on ensuring the long term viability of a business. We have assisted in the set up of tax funds and worked with tax advisers to advise on a variety of structures which are able to deal with the modern approach to private equity.

Legal issues which should be considered include, but are not limited to, the following:

• due diligence on targets and solvency statements from directors
• due diligence on providers of funds and fund managers
• review of funds (including analysis of the history of funds)
• structure of equity provisions with articles dealing with dividends, preference shares, capital returns, financial controls, voting rights and flooding rights
• as articles are a public document, it will be appropriate to include certain provisions in a separate investment agreement, such as warranties on the current position of the target, mechanisms for warranty claims, limitations on such claims and protection of EIS status
• provisions of a legally binding business plan, with remedies for failure
• Shareholders’ Agreement / Joint Venture – which may support the investment