Private Equity Fund Restructurings: Due Diligence, Sponsor Fiduciary Concerns, Key Deal Points for New Investors

A live 90-minute CLE webinar with interactive Q&A


Wednesday, August 29, 2018 (in 11 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE webinar will examine various issues sponsors must consider in restructuring an investment fund. The panel discussion will include the threshold due diligence to conduct, the fiduciary duty the sponsor owes existing investors, and the deal points to resolve with incoming investors.

Description

In a fund restructuring, new investors agree to make a significant cash investment in a fund that is approaching the end of its term, providing existing investors seeking liquidity with a more attractive valuation than would be available on the traditional secondary sale market, while offering new investors the opportunity to benefit from the potential upside in the funds investment portfolio.

Sponsors must consider a number of threshold issues. Regulatory or contractual consents may be required. Certain investments might be carved out from the overall transaction, either because those investments are close to liquidity or are difficult to value. If the sponsor has or will receive carried interest as a result of the transaction, the potential of a clawback must be taken into account.

A fund restructuring may provide a means to achieve certain objectives relating to the fund, such as adjusting the fund economics (carried interest and/or management fee) or accessing additional capital. However, in pursuing its own objectives, a sponsor must ensure it is transparent with its investors about the potential conflicts of interests they may present.

The new fund agreement may differ from the initial agreements as to capital contributions, the distribution waterfall, portfolio investments, governance, reporting, the scope of representations and warranties to be provided, the survival period for existing claims, and any holdbacks or escrows. The Tax Cuts and Jobs Act introduces new provisions that will affect both incoming and exiting investors and must be taken into account.

Listen as our authoritative panel discusses these and other concerns of sponsors, existing investors and new investors in the restructuring of a private equity fund.

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Outline

  1. Fund restructuring: general framework, benefits
  2. Due diligence and threshold concerns
  3. Sponsor fiduciary duties and conflicts of interest
  4. New fund terms
    1. Distribution waterfalls
    2. Additional capital contributions
    3. Portfolio investments
    4. Governance, reporting, voting
  5. Tax ramifications for sponsors and investors (old and new)
  6. SEC regulatory scrutiny

Benefits

The panel will review these and other critical issues:

  • When is restructuring preferable to a secondary market transaction when a fund has come to the end of its term?
  • How might the sponsor’s objectives differ from those of the existing investors, and how should conflicts of interest be disclosed?
  • What deal terms are likely to vary from the initial fund agreement, and when should they be negotiated?
  • How will tax reform affect incoming and outgoing investors?

Faculty

Belsley, Michael
Michael D. Belsley

Partner
Kirkland & Ellis

Mr. Belsley's practice involves structuring, negotiating and documenting complex business transactions, including...  |  Read More

Stephen Butler
Stephen Butler

Partner
Kirkland & Ellis

Mr. Butler's practice focuses on the tax aspects of complex business transactions and reorganizations, with a...  |  Read More

Schlaphoff, Aaron
Aaron Schlaphoff

Partner
Kirkland & Ellis

Mr. Schlaphoff’s practice focuses on complex regulatory, compliance and structuring matters for sponsors of a...  |  Read More

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