Private equity law: area of practice
Solicitors advise private equity funds on the acquisition and disposal of companies and any legal issues that arise during the time they own a company. A private 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 by owning and buying businesses. Typically, a private equity firm will buy a majority of the shares of a company, control the company and the firm’s representatives sit on the management board.
Who does the private equity solicitor advise?
On a typical private equity acquisition, one law firm acts for the private equity fund that is buying the company; another firm acts for the seller; a third for the bank that is providing finance to the private equity fund; and a fourth firm advises the company’s senior management board.
Solicitors work on up to five or six deals at a time – all at various stages of completion – and a transaction typically lasts three to six months. In the preliminary stages of a potential deal, private equity solicitors are instructed by the client to carry out an initial analysis of a company. Once a client decides to proceed with the acquisition, many lawyers and advisers are involved in the due diligence process, which is designed to flag up any risks or issues that might affect the value of the company. Towards the end of the process, solicitors work through the contractual arrangements with the seller and arrange the financing.
Typical property transactions
The number of lawyers working in a team will vary vastly depending on the complexity of the deal and whether the client is the bank, the management team, the sellers or the buyers – there is more work involved when buying a company, particularly at the due diligence stage. In 2012 just one associate solicitor and I advised on the sale of a company worth €1.8 billion; in the same year I worked on a deal where the clients bought a business worth approximately $650 million, which involved a team of 200 lawyers across 50 jurisdictions.
Private equity solicitors can expect to travel overseas; the amount of travel depends on the firm you join and where the clients are based. The work is cyclical and the hours can be long and involve weekend working leading up to key deadlines and the completion of a deal: some working days are 9.00 am to 5.00 pm; some are 8.00 am to midnight or later. Many private equity deals are competitive auctions so lawyers are often busiest in the run-up to those auction bid dates, when the client is in a race against other buyers. The variability of the hours can be tough but the variety of interesting work makes up for it: you may be buying companies as varied as Odeon Cinemas, Alton Towers or Aston Martin. The best aspect about this practice area is working with such motivated clients; private equity is a young, meritocratic industry with many clients in their 30s and 40s. The relationship between lawyers and clients is long-standing and based on trust so it is important to build those relationships socially.
How have property departments been affected by the economy?
Private equity was badly affected at the beginning of the recession because of uncertainty and a lack of available finance; in 2014, the work is picking up. While banks remain constrained and conservative in terms of lending, private equity funds provide a viable alternative to companies struggling to raise bank finance.
What sort of work will you get as a trainee?
Trainees assist with due diligence, structuring and the huge amount of documents needed to close a transaction. There are opportunities for early responsibility for trainees: on a large transaction, there are plenty of discreet tasks that can be given to trainees.
The skills private equity lawyers need
- Commercial acumen.
- Good people skills – for working in teams and building long, trust-based relationships with clients.
- Sound numerical skills.
Types of law practised
GAVIN GORDON is a partner in the private equity group at KIRKLAND & ELLIS INTERNATIONAL LLP. He studied law at the University of Cambridge.