Aprivate equity fund is a type of investment fund set up by a private equity firm, which invests other people’s money (such as pension funds or insurance companies) by buying, owning and selling businesses.
Clients include private equity funds, investors in those private equity funds or banks. Lawyers work on lots of different areas, including setting up funds to receive investments, helping with the making of new investments, or on the day-to-day management of previous investments, such as selling a minority interest in a company, refinancing a company’s debts during the lifetime of an investment or floating a company on the stock market.
Private equity is a multidisciplinary practice area: in addition to the core principles of contract, equity and trusts and company law, lawyers use banking law when structuring debt financing; tax law when structuring funds and investments; and competition and regulatory law when making new investments. In some firms, private equity is a separate practice area; in others, it forms part of the broader corporate offering. As a trainee, therefore, you might have the option of undertaking a private equity seat or be exposed to private equity deals during a broader corporate seat, as well as in a finance, tax, competition or regulatory seat.
Private equity transactions are fast moving. A trainee might get involved at the initial stages when a company is putting itself up for sale in an auction. In that case, a financial adviser will solicit potential buyers, who will often include private equity firms. There is often a lot of competition in the auction process; you could work hard only to find that the client fails to win the bid. If your client wins, there is more work to do to make the deal go through.
Internal legal team or private equity firm?
Corporate clients are large and often have quite large internal legal teams working on their deals. By contrast, private equity firms are small and the external legal team mirrors that, with expertise drawn in from around the law firm where needed. There’s no more or less overseas travel than any other area of practice. On some deals you travel all the time; on others you don’t leave London and negotiate by phone.
You don’t need specialist sector knowledge to be successful in this field. Good private equity lawyers are able to deploy their skills and experience in any industry. That said, specialist knowledge is called for when looking at financially regulated businesses, such as insurance companies or ‘fintech’ (financial technology) businesses.
Working hours are deal dependent. This field is client driven and your working day will be influenced by the timescale of the deal; if you’re busy, you’ll work long hours and if not, you can leave at 6.00 pm. There isn’t much socialising with clients – they are too busy to want to be wined and dined.
How recession-proof is private equity law?
When new investments slowed in 2008 and 2009 after the banking crisis, and in 2011 after the Euro crisis, the banks stopped lending as readily and people looked to find different ways of getting the money needed for new investments. Over the last 20 years, I’ve seen the private equity market and size of investments increase. Big US private equity funds have set up in London and there’s been a growth in pension funds, such as those from Canada, making new investments directly. The industry as a whole has also become more closely scrutinised and regulated.
How will this area of legal practice be affected by Brexit?
Parties on all sides are taking a wait-and-see approach while there’s uncertainty about the timing and manner of the UK’s withdrawal from, and its future relationship with, the EU. Once there is clarity, there is likely to be an increase in work for private equity lawyers as large companies start to reshape their operations, and put some of their businesses and divisions up for sale. The availability of debt financing is the main factor likely to affect private equity activity levels.
Read TARGETjobs' advice on how to approach Brexit in a training contract interview here.
What sort of work does a private equity trainee do?
Ideally trainees get the chance to see an entire deal from start to finish. Trainees are given non-disclosure agreements to draft, and asked to organise the signings and closing of a deal – and everything that goes in between. One of the pulls towards private equity work at the start of my career was the early responsibility firms can give trainees in this area.
The skills private equity lawyers need
- Hard working and a self-starter.
- A good communicator: you will be challenged by smart, confident clients about the law and your advice.
- Organised and have good attention to detail.
Types of law practised
- Competition and regulatory.
- Equity and trusts.
BEN PERRY is a partner at SULLIVAN & CROMWELL LLP. He graduated with a degree in law from Oxford University in 1995.