Practice Leader: Bruce K. Fenton
Pepper Hamilton LLP represents private equity clients in the full panoply of investments and dispositions encountered in the life cycle of an investment fund, including structured equity and leveraged buyouts, PIPEs, roll-ups and exits such as refinancings, recapitalizations, mergers, public offerings, and stock or asset sales.
The core of our private equity practice consists of approximately 90 corporate and securities lawyers who represent private equity funds in connection with their investments, or businesses taking on private equity financing. Our corporate and securities lawyers work closely with lawyers in the firm’s finance, tax, intellectual property, employee benefits, real estate and environmental practices. Approximately 15 of these lawyers have deep experience in fund formation for management groups and institutional and individual investors, and use their insight to help coordination of fund operations and investment objectives. Our aim is to build long-term relationships with clients by anticipating issues and helping clients achieve their goals without undue expense. Our transaction teams work effectively and efficiently with the client and its financial, accounting, tax and other advisers.
Private Equity Investments
Our lawyers have represented fund clients and recipient companies in investments at myriad stages, including control and minority investments and investments in publicly traded companies (e.g., PIPEs). Our representations include all types of structured debt and equity investments (common, preferred, pseudo-preferred and debt), leveraged buyouts, recapitalizations and follow-on equity or debt-funded acquisitions, as well as counseling on best practices regarding portfolio company governance and operations. We also assist clients with buy side auction bids and sell-side processes.
Our experience spans such industries as financial and business services, software development, biotechnology, health care services, retail, distribution logistics, e commerce, Internet service providers, industrial manufacturing and traditional “brick and mortar” companies. When the company’s business is technology-driven, we work closely with our intellectual property lawyers to evaluate the technology and advise our clients as to the legal risks of an IP-dependent enterprise.
Representing clients in these transactions requires us to analyze critically the capital structure of a company to understand how the relative rights, preferences and privileges of particular securities fit together at the time the investment is made as well as at its anticipated exit. Our tax lawyers structure investments and plan at the outset for likely dispositions, refinancings and other exits. We strive for tax efficiency, creativity and certainty for the investment fund and the portfolio company and its other securityholders. We understand the different investment motivations and investment time horizons of the various participants in the transaction, which helps align exit strategies with the needs of our client and the rights and obligations of other security holders.
In each transaction, our common goal is to effectively assist our client in developing a structure that marries the operational, capital, accounting and tax needs of a particular situation. We are experienced in using limited liability companies and blocker or aggregating entities to achieve a structure that provides flexibility in tax planning, the allocation of management and operation control, and the allocation of the economics among the various investors.
The following is a list of representative private equity clients that Pepper has represented in venture, leveraged buy-out, recapitalization, and control and minority investments:
- Advent International
- Edison Venture Fund
- Gores Technology Group
- Healthcare Ventures
- Kline Hawkes
- Liberty Ventures
- Littlejohn & Co.
- LLR Equity Partners
- Milestone Partners
- New Spring Capital
- Quaker BioVentures
- Safeguard International Fund
- Safeguard Scientifics
- Tenex Capital Management LLC
- TL Ventures
- Trivest Companies
As important as finding a good investment is implementing an exit strategy to realize the investment’s original value proposition. Sometimes this involves pre-disposition acquisitions to enhance a liquidity event platform; other times it involves “simply” a refinancing or leveraging of the portfolio company’s assets with a distribution of proceeds to the investor. Still other times, it involves a public offering with the client ultimately selling into the public market.
Pepper’s experience includes the full spectrum of exit transactions. We assist funds and their portfolio companies in asset sales, stock sales, recapitalizations, refinancings, mergers and consolidations, IPOs and other liquidity events. In each liquidity event, our advice addresses negotiation and deal strategy, structural matters, the terms of the particular transactions, fiduciary issues, indemnity risks and legal compliance with securities, corporate and other laws. We team up with our tax and compensation lawyers to structure possible tax-free or reduced-tax rollover opportunities for our private equity clients and the other stockholders of the portfolio companies in the context of an exit. While most of the transactions are negotiated between the parties, we also advise clients in hostile situations.
In addition, we have significant experience working with our clients’ investment bankers to structure and manage sell side auctions that enable the potential purchasers to focus on the economics and potential growth opportunities in the target rather than legal issues that serve as a distraction to value creation.
Public and private offerings of debt and equity securities enable our clients’ portfolio companies to restructure their balance sheets and raise new capital to grow their businesses, whether organically or through acquisitions, often accompanied by a partial disposition by the fund investor. Pepper lawyers have assisted portfolio companies in a variety of IPOs, follow on equity offerings and Rule 144A offerings of debt or convertible preferred stock, often followed by platform add-ons or roll-up acquisitions. We work with many national, regional and specialty investment banking firms. As many of our securities lawyers represent investment banking firms as underwriters’ counsel, we are well-positioned to provide knowledgeable counsel to private equity clients making use of underwriter services.