Case Study: Private Equity Fund

Video Transcript

I started working with an individual who wanted to run a private equity fund. It was his first fund. We talked about what kind of entity to form and what the terms of the fund should be and bringing in investors and what their expectations would be.

He quickly found a manufacturing company to acquire. We worked on a purchase agreement including an option to purchase the real estate. We started as a stock deal because the company had clients and a key client they didn’t want to disrupt with the transfer of the agreement.

However, there were some issues that were encountered and we needed to switch the transaction to an asset acquisition. In reviewing the contracts with the clients, we realized their consent would’ve been needed in any event. With the step-up in the basis of the assets in an asset deal, the client was able to share some of those savings with the seller and let the seller walk away on basically the same net terms.

That was a win-win. Shortly after that, the client realized there was a product line he could spin off into a separate business. That fit really well with his goal of running a private equity fund with multiple businesses. We structured that. Then quickly he found another company to acquire and add on to his first platform.

We used the same asset purchase agreement that we’d negotiated in the original transaction. We were able to close that in less than two months because I’d been working with them the entire time. That helped that transaction just go very smoothly and close very quickly.

Then he brought on a new employee. A key employee he wanted to incent with ownership. We structured profits and interest grants for this person. It’s a great way for an LLC to grant ownership to an employee in a tax-advantageous manner. It’s not taxable at the time of the grant to the employee but they’ll get the benefit of capital gains treatment at the end.

You can see in this project, I worked on all kinds of legal issues for the client entity, choice of entity, entity formation, securities and private offerings, M&A, employment, tax issues, real estate.

Through all this, I was the main contact for the client. A one-stop shop he’d call. If I needed to bring in my colleagues for their expertise, I would do it seamlessly so that for him, it was really smooth and easy to work with Avisen. I’m hoping as this client grows that we’ll continue to be that first call when he has a legal need.