You spent six months on secondment in BGH Capital’s legal team. How did seeing transactions from the client’s side of the table influence the way you approach deals and advise private equity clients today?
The experience reinforced my understanding that, while PE appreciates the role that lawyers play in a transaction, their focus is on keeping up the deal momentum. Advisers need to facilitate that by taking a pragmatic approach through different phases of the deal, rather than being a bottle neck.
PE firms are very sophisticated. They don’t want or need long winded advices, or to be told what they already know. They don’t want advisers who hedge. They want a clear view that is more than a legal view – it needs to be commercial and strategic as well. That includes being prepared to challenge instructions, where an adviser sees a better way forward.
Private equity investors are often looking beyond completing a transaction to creating value over many years. How does that long-term commercial focus shape the way you work with clients?
Typically, PE will rely on founders and management to help guide them, especially for the first few years, which takes us back to the idea of negotiating mutually agreeable outcomes for the PE client and the founder at the outset.
The terms of the transaction need to protect PE from a downside perspective, for example around restraints and bad leaver scenarios. On the upside scenario, they can include incentive plans or kickers to further motivate founders and management.
The bottom line is that, even if the shareholders agreement involves an 80/20 split, the business will be best run as a 50-50 partnership.