Private equity law

Private equity is a term commonly used to describe money that has been pooled together for investment in companies. Private equity transactions usually involve acquiring companies, buying a portion of a company or selling a company.

Graduate careers in private equity law

Typical transactions involve the acquisition of a company by a private equity firm, using a combination of money raised from investors ('equity') and money borrowed from banks ('debt'). The private equity firm will acquire a company with a view to increasing its value, usually by growing the business and increasing its profits. It will then look to sell the company as a successful business after a number of years (known as an 'exit').

Private equity lawyers may be involved in three or four transactions at any one time, each at different stages of the transaction process, and would complete between five and ten deals each year depending on the state of the market. The corporate team will typically consist of three to five lawyers, with support from other specialist teams within the firm.

When a private equity firm is looking into acquiring a business, it will initially ask its lawyers to examine the state of the business – a process known as 'due diligence' – and help the private equity firm come up with a value that it is prepared to pay. The lawyers will then prepare offer letters and other pre-contractual agreements that will start the negotiation process with the seller. It is not unusual for some transactions to have more than one interested buyer, and private equity firms usually submit confidential bids to the seller in the hope of winning the transaction. This is known as the auction process.

If a private equity firm succeeds in its bid, it might look to its lawyers to negotiate exclusivity arrangements with the seller, and it would also proceed with negotiating and completing the transaction, resulting in the transfer of the business to the private equity firm. The short timetables involved can result in long, unpredictable hours including occasional all-night working and weekends at the peak of a transaction.

Lawyers can expect to have frequent contact with clients, who include private equity firms; management teams of target companies; banks who provide loans to the private equity firms; and the seller who may be a company or another private equity firm. Private equity clients are well known for socialising to celebrate a job well done and to get to know their advisers.

Is private equity law recession-proof?

Transactions of one form or another can always be found, whether they are private equity firms exiting existing investments, acquiring new companies or restructuring and refinancing existing deals. Lawyers in this area have kept busy during the recession, although with a greater focus on managing their clients' existing companies rather than acquiring new companies.

What skills does a private equity lawyer's need to do the job?

• Good attention to detail.
• Innovative thinking.
• The ability to communicate complex commercial and legal issues in a clear manner.
• Good people skills.

What is it like doing a trainee solicitor job in private equity law?

Trainees often assist with the pre-contractual documentation and due diligence exercise. As transactions progress, trainees often set up the acquisition structure, ensure corporate authorisations are in place and manage the satisfaction of any conditions to completion. Trainees will also be involved in assisting with drafting documentation and managing the transaction generally.

Types of law practised

• Commercial.
• Contract.
• Corporate.
• Finance.

About the author

FARAH ISPAHANI is a partner in the corporate group at FRESHFIELDS BRUCKHAUS DERINGER LLP. She graduated with a degree in law from the University of London, SOAS.