Legal Considerations for Starting A Private Equity Firm

Private equity firms are enjoying record buyout values in 2017, so it’s no surprise there’s growing interest in joining the industry. But successfully starting a private equity firm is not without its challenges.

During a recent webinar, we covered legal and IT considerations for launching a private equity firm with Monica Arora, Partner, Proskauer Rose LLP, and Tim Kennedy, SVP, Eze Castle Integration. Today, we are going to briefly review the legal considerations to help you navigate the competitive landscape for new private equity firms. Be sure to watch the full webinar replay for deeper guidance from our expert Monica Arora.

Key Points about Private Equity Vehicles

• Fund Vehicle Limited Partnership, for U.S based funds, typically uses Delaware or Cayman Islands jurisdiction for a limited partnership

• Limited Partners are your 3rd party investors

• General Partners are your private equity firms

• Fund Manager is a different entity, which is a special purpose vehicle that is typically created for each fund, is the bricks and mortor

Basic Private Equity Fund Structure

Fund structures can be influenced by a number of factors, including:

• Target investor base

• Target investment strateg

• Tax status of the individual executives

• Regulatory burden placed on the structure and the application of marketing requirements

General Fund Terms

• Time Period

• GP Commitment

• Management Fees - 1.0% - 3%

• GP Carried Interest - Profits split 80-20

• Co-Investments

• Key-Person Term

• Advisory Committee

• Conflicts of Interes

• Investor Protection

• Side Letters - Key Issues - need to disclose a PPM
   

Get more insight into these private equity legal considerations by listening to the full 60-minute replay here or below.

Stay tuned for Part 2 as we talk technology considerations when launching a private equity firm, and be sure to download our whitepaper, Private Equity Outsourcing is Going Cloud but Which One?