Private equity is a pretty confusing area of corporate law, but one which more and more law firms are involved in. Here's a brief primer and some firm work examples.
What is private equity?
Private equity and investment firms operate funds that pool the investments of anybody prepared to part with their money for a sustained period of time. Private equity firms use investors' cash (equity) in combination with money raised from banks (debt) to buy companies or other assets with the goal of selling them on at a profit. When the targeted company's assets are used as leverage and a significant amount of bank debt is employed, the transaction is known as a leveraged buyout (LBO).
Venture capital is a subset of private equity that sees investors put money into start-up companies or small businesses in the hope they will be sold to a private equity firm or taken public. Although this typically entails high risk for the investor, it has the potential for above-average returns. This high risk is typically offset by investing smaller amounts over a shorter timespan.
Investment management is the professional management of various securities (shares, bonds etc.) and assets in order to meet specified investment goals. Investment management lawyers advise on the structuring, formation, taxation and regulation of all types of investment funds.
A hedge fund is a private, actively managed investment fund. It aims to provide returns to investors by investing in a diverse range of markets and financial products, regardless of whether markets are rising or falling. Using the derivatives market helps hedge funds achieve this.
A mutual fund is a collective investment vehicle that pools money from many investors to purchase securities. The term is most commonly applied to collective investments that are regulated and sold to the general public.
A real estate investment fund/trust is a publicly traded investment vehicle that uses investors' money to invest in properties and mortgages. Both hedge funds and mutual funds generally operate as open funds. This means that investors may periodically make additions to, or withdrawals from, their stakes in the fund. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders. This contrasts with a closed fund, which typically issues all the shares it will issue at the outset, with such shares usually being tradable between investors thereafter.
Private equity at Kirkland & Ellis
There's no escaping it: for trainees at Kirkland & Ellis, private equity is the name of the game.“If you're looking for public M&A or public sector work, you won't find it here,”one trainee advised.“The firm wants to provide a full service to private equity clients, and our aim is to be the go-to firm for funds at any stage.”Consequently you'll find private equity clients on nearly every department's client roster. As this trainee put it:“It's all encompassing.”
So if you want to make it at K&E, you're going to need to know your stuff. Showing that you've mastered the basics of the PE market at the interview stage will stand you in good stead: if they ask you about hedge funds, you don't want to raise eyebrows with a hopeful theory about pro-environmental bursaries. “I had to justify why I was interested in private equity and why I found certain deals that I mentioned fascinating,”one trainee recalled of their interview with the firm.
Kirkland's London private equity team has 57 partners and associates at last count and represents over 200 private equity firms across Europe. Clients include major private equity players like Blackstone, KKR, TPG, Oaktree and Bain Capital. The firm recently:
- acted for Actera, the largest private equity firm dedicated to investments in Turkey, on the $800 million sale of Turkey's largest cinema chain to an investment group headed by a South Korean cinema operator;
- advised Bain Capital on the £820 million sale of London-based Bio Products Laboratory, which manufactures human blood plasma, to Chinese investment firm Creat;
- advised Brookfield Property Partners on the $750 million acquisition of a European student accommodation business;
- advised established UK private equity firm Cinven on its $1.4 billion agreement to buy Pennsylvania-based clinical trials business Bioclinica from two US private equity firms;
- acted for the sovereign wealth fund of Singapore on the €2.4 billion acquisition of a European logistics properties owner and operator from TPG.
Private equity at Mayer Brown
Mayer Brown's global private equity offering is set to grow after it added two PE pros in London. In February 2016, Chambers UK-ranked Perry Yam was brought over from Reed Smith to head up Mayer Brown's London private equity group; just four months later he was joined by fellow former Reed Smith partner James West. Yam's reportedly been tasked with increasing London's collaboration with the Paris office and the firm's US offering. It appears that he's wasted no time in getting things ramped up: “Since we've hired the new partners we've already seen an increasing amount of private equity work,”reported our trainee sources in the corporate department.
- The firm's private equity team currently has around 20 lawyers and its clients include Minneapolis-headquartered Värde Partners, Miami-based HIG Capital and Canada's Brookfield Capital. Recently the firm;
- advised European middle-market private equity firm Vitruvian Partners on the $215 million purchase of OAG, which provides airline schedule information;
- advised HIG Capital on its sale of optical fibre manufacturer Fibercore to Plymouth-based crash test dummy company Humanetics for an undisclosed sum.
Private equity at Weil Gotshal & Manges
At Weil, private equity is the linchpin of the corporate practice. The firm has 75 PE partners across the world, and its London group has earns high Chambers UKrankings for its investment funds and buyouts capabilities. In a lucrative coup a few years back, the team poached a 16-strong private funds practice from Clifford Chance, further padding its practice and solidifying its rep as one of the best in the market. The team has repeatedly demonstrated pulling power: in 2014 by snagging two partners from Latham & Watkins and Hogan Lovells, and in 2016 with a new acquisition from Herbert Smith Freehills. The team has steadily attracted new clients, including three of the world's largest funds: Blackstone, KKR and CVC. Lawyers also assist on the formation of venture capital and hedge funds.
According to our sources, Weil's corporate department – which typically takes on four or five trainees at a time – is“a great way to gain private equity experience as it's a primary source of work for Weil.”For trainees, “a big part of the job is managing the completion agenda and keeping on top of everything during the signing and closing process.” We also heard that trainees have a go at drafting ancillary documents and board minutes, and take on some non-transactional tasks like researching company law matters. The team has around 35 lawyers and it recently:
- advised Mercury UK, the majority shareholder of an Italian bank owned by Bain Capital and Advent International, on the €1 billion acquisition of Setefi, an Italian payment processing business;
- advised Canada's Public Sector Pension Investment Board on co-investment arrangements with BC Partners to acquire Keter Plastics from the Sagol family;
- advised Oaktree Capital on the sale of the UK arm of Fitness First to DW Sports for an undisclosed sum.