Private equity law: area of practice
Private equity funds invest across a broad range of sectors, explains Marc Field – a partner at Addleshaw Goddard LLP.
You get the opportunity to work across a wide spectrum of industries and sectors. However, private equity transactions are often fast paced, and hard work and commitment to the cause is required.
The term ‘private equity’ is a generic expression for investment in securities in companies that are not listed on any public stock exchange – generally in the UK this means investments by private equity firms in privately owned businesses. A private equity firm will typically raise a private equity fund from a wide range of sources, including pension funds, insurance companies and high-net-worth individuals.
The sector has become increasingly popular – you only need to see the size of the funds that successful private equity houses have been raising to know that more money is being invested in private equity funds. We have also seen more public companies being taken private by private equity houses, and this is something we expect to become more common in the coming years. Private equity firms have also become more accustomed to investing in regulated businesses.
What types of transactions are private equity lawyers involved in?
Solicitors will be involved in a wide variety of transactions, but they can broadly be split into two categories. The first is corporate transactions, which includes the original investment by the private equity firm, bolt-on acquisitions made by the business that has been invested in, and the exit (this typically involves either selling the business or floating it on a public stock exchange). The other category is day-to-day matters, which can involve a whole manner of things from issuing equity to a management team, to dealing with management change and refinancing of the business’ debt.
What does a typical transaction in private equity law look like?
Solicitors will typically have between five and seven matters ongoing at any point, but these will usually encompass a range of transactions across the life of the private equity firm’s investment. On an investment or exit, a team is likely to include one to two partners, two to three associates, a trainee and a paralegal. For some of the more day-to-day matters, the team will be smaller, with a single partner, associate and trainee.
Transactions move quickly, often because, for attractive business, they are run via an auction process where multiple private equity firms are competing to be the successful investor. The lawyers acting for the private equity firm selling will typically be involved earlier in the transaction, helping to get the business ready for sale. The lawyers acting for the private equity firm seeking to invest will be undertaking due diligence on the target business and marking up the sale agreement and equity term sheet for submission as part of their offer. Once the chosen bidder has been selected, then all the parties will want to move quickly to agree the legal documentation and to complete the transaction so that the management team of the target business can return to focusing on running their business rather than being distracted by the transaction.
What is working life like for a private equity lawyer?
All-nighters can happen right at the end of the deal, but these are exceptions rather than the rule. Private equity work is driven by client demands and so weekend work is sometimes necessary, but this will be driven by the transaction timetable.
While private equity firms do tend to have a focus on certain sectors, this is typically quite broad so you also get the opportunity to work across a wide spectrum of industries and sectors. However, private equity transactions are often fast paced, and hard work and commitment to the cause is required.
What will a trainee lawyer in a private equity department do?
Trainees on the side acting for private equity firms selling will typically assist with putting confidentiality agreements in place with interested bidders and helping to prepare the data room. Trainees acting for the private equity firm seeking to invest might be involved in undertaking due diligence on the target business.
There are many opportunities for early responsibility and trainees quickly become an integral part of the transaction team. The nature of private equity deals means trainees should also expect to be liaising regularly with lots of people, including executives at private equity houses, founders and/or management teams or members of the corporate finance team responsible for delivering the overall transaction.
What skills does a private equity lawyer need?
- The ability to build rapport.
- A strong work ethic and a commercial thinking.
- Organisational skills, proactivity and good attention to detail.
- Team skills, and an ability to find creative solutions to problems.
Types of law practised
- Competition and regulatory.
- Equity and trusts.
MARC FIELD is a partner at ADDLESHAW GODDARD LLP. He graduated with a degree in law from the University of Leeds in 2005.