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Legal Tips for the Private Equity Professional
07/13/2011
Jason Villalba

As the general economy continues to stabilize, M&A transaction activity in the middle market is slowly beginning to increase. While transaction numbers are not yet comparable to the heady days of 2007, there is enough recent data to suggest that a recovery (albeit a mild one) is underway.

In preparation for a more robust deal environment, private equity professionals may benefit from a brief review of some of the more relevant legal issues that they are likely to encounter in forthcoming transactions. Unquestionably, private equity professionals are sophisticated users of legal services and are supremely qualified to understand the subtlety and nuance of even the most complex transactions. However, private equity professionals who are pre-armed with an understanding of the whereabouts of the legal "tar pits" and "gold mines" that are present in most transactions will be better able to extract additional economic value from those transactions.

The essential duties of M&A counsel in a transaction include: (i) codifying the intent of the parties for the benefit of the counsel’s client, (ii) limiting or mitigating the risk of the client in connection with the transaction, (iii) guiding the client through the transaction process, and (iv) maximizing the client’s value with respect to the terms and provisions of the transaction. The well advised private equity professional will be able to assist his lawyer in accomplishing these objectives. This is not to suggest that the private equity professional should act as a second lawyer on the transaction, it is only meant to encourage the professional to understand the impact that legal provisions have on the transaction beyond mere risk management and risk allocation.

Originally published in Private Capital Review, Association for Corporate Growth. To read the full article click here.