How to negotiate private equity agreements

What is a private equity transaction? Private equity transactions in the UK market range from venture capital through development capital of various types to late-stage buyouts (management or leveraged buyouts, known as MBOs or LBOs). Private equity institutions have in recent years predominantly led late-stage buyouts. Management-led transactions still exist, but these tend to be in the low or mid range of late-stage buyouts. For the purposes of this article, a private equity transaction is a typical UK MBO/LBO structure with a single private equity institution as investor and a UK management team. The investor takes a majority equity stake in the new company (newco) structure with management taking a minority stake.

Private equity transactions can at first glance appear complex - effectively three transactions within a transaction (debt, equity and acquisition) with many different moving parts. This article explains how one particular component of the transaction...