Private equity is a type of investment where investors’ money is used to buy out businesses. It’s like Dragons’ Den! In private equity deals, the investor buys a controlling stake in the business. So next time you’re watching the BBC show, that’s what Peter Jones, Deborah Meaden and their fellow Dragons are striking a deal upon – a controlling share of a business.
Private equity firms or individuals really want to increase the value of the company they’re investing in – usually by increasing the profits and growing the business. They then look to sell the company (or their share of it) after a few years, usually three to seven (known as an ‘exit’).
Why is it important? What does it involve?
Private equity lawyers have an important role in a deal as they help the private equity firm or individual negotiate the terms on how they contribute their cash and they also act on behalf of the private equity firm or individual when it buys and sells investments.
The private equity lawyer has the job of making deals happening and keeping clients in line with the law. When businesses are being bought or invested in, lawyers’ structure and negotiate the acquisition and finance documents. They then close the transaction and establish the business and legal structure for the new company.
When a private equity firm or individual wish to sell a company, private equity lawyers negotiate terms for the acquisition and advise on tax and disclosure. Usually, these are in time sensitive situations where confidentiality is key.
Private equity lawyers’ work with some very influential private equity investors and are expected to provide sound legal advice on all aspects of a deal as well as displaying their commercial expertise. Given that private equity lawyers spend every day working for clients in the financial market, they should be able to solve business problems.
Break it down for me a little bit!
Private equity lawyers will draw on many of the skills a ‘normal’ mergers and acquisitions lawyer possesses. However, due to the different nature of investing in comparison to merging or acquiring (i.e. keeping the same management rather than replacing them), the exact terms of a deal may be more complex, making the work challenging and interesting. Additionally, and for obvious reasons, private equity law overlaps with finance and tax law and also competition law at different stages in the deal.
To succeed as a private equity lawyer, you will need to possess an abundance of energy, be able to work effectively as part of a team and also be pretty handy at problem solving. As touched upon above, commercial awareness is vital as it means your advice will be on point and up-to-date.
Mia Hatfield is a second seat trainee at Weil who spent her first seat in Banking and Finance and is now in Corporate. Here she outlines the work she has undertaken in private equity such as acquisitions, IPOs and reorganisations…
In just a few words, could you explain what private equity actually entails?
Private equity funds are raised by marketing to investors such as pension funds, banks, insurance companies, companies in general and individuals. These private equity funds are usually established for a 10 year period during which the fund will make a number of investments, primarily in unlisted companies with a view to achieving a high return by exiting within the next 5 to 7 years.
What kind of projects have you been working on so far? Do you tend to take on short-term tasks or does the nature of the seat require longer-term assistance?
During my first month I worked on a wide range of projects, including a scheme of arrangement, employee share scheme and the recent IPO of DFS. This was particularly interesting, as I was part of the team working on the financing for this transaction during my previous seat in banking, and therefore had the opportunity to track the deal from beginning to end from two perspectives. As a trainee, it is ‘normal’ to work on a number of deals simultaneously, which has enabled me to gain exposure to a broad cross-section of the team’s work, and work with a number of different team members. Deals can continue for several weeks or months and involve a broad range of trainee tasks, which can be discrete, for example drafting board minutes, or continuous, such updating an active documents list which acts as a checklist for the transaction at large.
How does this seat compare with others you have completed?
My private equity seat is the second seat of my training contract, my first seat having been in banking, where I worked on leveraged buyouts and refinancing’s. I’ve really enjoyed the diversity of the work I've undertaken during my training contract, in particular in private equity where the team works on a wide range of transactions including acquisitions, schemes, IPOs, re-organisations, ESS schemes and general portfolio company management.
Does your work put you in direct contact with clients?
Yes, trainees are in contact with clients from the beginning of their training at Weil whether that be through calls, email correspondence or at social events. As trainees we are responsible for our own workstreams on each deal and are treated as a valued member of the team from the outset.
How do you keep your head up when dealing with potentially sensitive matters?
When dealing with sensitive matters, it is essential to remain calm and adjust your demeanour and attitude to suit that of the client. If in doubt, it always helps to discuss the situation with your supervisor and benefit from their experience!