Practice Area Focus: Private equity

What is private equity?

The term private equity is used to refer to a range of transactions in which private equity funds invest in or acquire companies or businesses where there is potential for increasing the shareholder value.  These transactions typically involve the acquisition of a business, company using both bank finance and money committed by the private equity fund’s investors to fund part of the purchase price. Once acquired, the companies which a private equity fund holds are known as “portfolio companies”.

A private equity house manages an investment fund comprising a group of investors who commit capital and give the partners and employees of the private equity house the authority to source and invest in transactions on behalf of the fund.  A private equity house will look to realize an investment on behalf of the fund within three to seven years of the original investment.  This realization or “exit” is typically structured as a sale of the portfolio company to a trade purchaser or another private equity fund or by way of an initial public offering of the portfolio company’s shares on a stock exchange.

What’s the working culture like in a private equity department?

The work can be intense and fast paced, making it an exciting practice area to be part of.  Our clients are smart and driven people who have a good understanding of the legal issues arising on deals which really keeps you on your toes!

The partners are very hands on in their approach, but are very keen to involve people at every level of the team in the deal and directly with clients, which is great.

What’s the typical makeup of a private equity lawyer’s client base?

The typical makeup of a private equity lawyer’s client base is likely to include a range of private equity houses (investing in deals of differing values in a number of sectors) as well as teams of managers who require advice in relation to their investments alongside private equity houses.

Which other practice areas do you work most closely with?

Finance and tax (in relation to funding and structuring respectively), although most departments will become involved throughout the course of a deal, particularly in relation to due diligence.

What skills make a good private equity lawyer?

Commercial awareness, energy, drive, teamwork and problem solving.  Technical expertise is obviously a prerequisite.

What impact has the recession had on your practice area?

Leveraged buyouts (i.e. acquisition of companies with bank finance being used to fund part of the purchase price) have become less commonplace.  As a result our work has become more diverse with private equity houses taking a less conventional approach to deals, and in  particular to funding.  So, for example, private equity funds are considering acquiring significant minority interests in both public and private companies, rather than limiting their deal activity to the acquisition of the whole or the significant majority of a private company.  Private equity houses have also spent more time evaluating their options in respect of their existing portfolio companies and this is reflected in the legal advice we give.

What recent key private equity deals has your firm been involved in?

Our work for Lion Capital on the £1.1bn acquisition of FoodVest Group (one of the largest manufacturers of frozen foods in Europe) earned Weil Gotshal a nomination for Private Equity Team of the Year (2009) at the Legal Business Awards.

We also recently advised Advent International in the highly competitive auction to acquire Craegmoor Limited, the leading independent provider of specialist care for adults and younger people in the UK.

In addition, Weil Gotshal advised HgCapital on two significant disposals – the sale of Boosey & Hawkes to Imagem Music and the sale of Clarion Events to Veronis Suhler-Stevenson.

What do you think will be the future shape of the private equity department?

There will continue to be a stable flow of conventional private equity work for our core clients.  However some of the focus of our work will shift away from leveraged buyouts to more innovative deal structures.

What phrase is a private equity lawyer most likely to use and what does it mean?

“Exit” which means the realization of the private equity fund’s investment in a business.  This is one of the most important considerations and a great deal of time and energy is expended ensuring the transaction is structured so as to maximize the private equity investor’s ability to realize its investment over the medium term.