Private Equity Law Firm in New York City

A private equity law firm can represent your company in raising funding or when it is being bought out. Generally, private equity funding occurs when private equity firms buy: (a) troubled companies with underperforming assets or business units; (b) companies with the intent to improve its operations and reselling it for a profit or exiting through an IPO; (c) shares of start-ups during a round of seed financing. These private equity firms buy these companies or shares using a mix of debt and capital, raising money from institutional and accredited investors who invest in different types of assets. If a private equity firm is interested in purchasing shares of your company, a private equity law firm can advise you on the transaction.

Types of private equity funding

Distressed funding

One form of private equity funding is distressed funding where private equity firms purchase troubled companies with a lot of potential. Usually, these troubled companies have valuable assets, such as patents, or underperforming business units due to mismanagement. Private equity firms usually purchase these troubled companies with the exit strategy of managing the company to perform better and later reselling or selling the assets for a profit.

Leveraged buyouts

Another form of private equity funding involved leveraged buy-outs. Private equity firms purchase companies with a cash flow using a mix of debt and capital, with debt accounting for 90% of the overall funds. This debt is transferred to the acquired company’s balance sheet and the acquired company’s cash flow is used to pay for the debt that was used to purchase the company. The private equity firm then turns around the company using different strategies such as reducing the number of employees and replacing the entire management team. To exit for a profit, the private equity firm resells it once the company’s financial health has improved or registers it for IPO.

Venture capital

Venture capital is quite popular in start-ups. Here, rounds of seed financing are conducted where angel investors provide capital to the entrepreneurs. These investments are usually given to companies with high growth potential, such as Uber. When Uber launched, it obtained capital from Series A and Series B fundings in order to funds its expansion to different markets.

What can a private equity law firm do for you?

Private equity firms will always try to get the best deal out of their money. It is important to get a strong legal representative to ensure that you, the target, are also getting the best deal out of the transaction.

The Anatomy of a Private Equity Deal

Whether you are on the company side or the sponsor side, a typical private equity transaction moves through several recognizable phases:

• NDA and initial diligence. The sponsor signs a non-disclosure agreement and receives initial financial and operational information about the target.
• Indication of interest or letter of intent. A non-binding statement of valuation, structure, and key terms, with binding provisions on confidentiality and exclusivity.
• Confirmatory diligence. The sponsor conducts financial, legal, operational, environmental, IT, and HR diligence. This phase typically takes 30 to 90 days.
• Definitive agreement negotiation. The stock purchase, merger, or asset purchase agreement is negotiated alongside ancillary documents.
• Signing. The definitive agreements are executed, the deal is publicly announced (in some cases), and post-signing obligations begin.
• Closing. Conditions precedent are satisfied, third-party consents are obtained, regulatory approvals are received, and funding flows.
• Post-closing integration. The portfolio company begins operating under the sponsor's ownership, with the integration plan executed and the value creation thesis tested in practice.

Key Provisions in a PE Purchase Agreement

The purchase agreement is the document that controls everything between signing and closing and that provides the framework for any post-closing disputes. Major issues include:

• Purchase price and adjustments. Often subject to working capital, net debt, and cash adjustments at closing.
• Reps and warranties. Statements about the target's business, finances, and operations. Heavily negotiated as to scope, materiality, knowledge qualifiers, and survival.
• Indemnification. Compensation for losses arising from misrepresentations or breaches, often subject to caps, baskets, deductibles, and survival periods. Many PE deals now include representation and warranty insurance instead of, or in addition to, indemnification.
• Covenants between signing and closing. Restrictions on operating the business outside the ordinary course before closing.
• Conditions to closing. What has to be true at closing for either party to be required to close.
• Termination and break fees. What happens if the deal fails to close, including any fees payable.

Representation and Warranty Insurance

Representation and warranty insurance (RWI) has become standard in middle-market and larger private equity deals. RWI shifts post-closing indemnification risk from the seller to an insurance carrier in exchange for a premium. RWI policies have their own underwriting requirements and exclusions, which must be considered alongside the indemnification provisions of the purchase agreement. We coordinate with RWI brokers and underwriters to align the policy with the deal economics.

Regulatory Approvals

Many private equity deals require regulatory clearance before closing. Hart-Scott-Rodino antitrust filings are required for transactions above the annual filing threshold (which adjusts each year). CFIUS approval may be required for transactions involving foreign sponsors or U.S. businesses with sensitive technology, data, or infrastructure exposure. Industry-specific approvals apply in regulated sectors — banking, insurance, healthcare, defense, communications, energy. Failure to clear these regulatory hurdles can delay or kill an otherwise complete deal.

Fund Formation

On the sponsor side, the fund itself is a complex creature. Limited partnership agreements, side letters with key investors, management agreements, advisory committee charters, and a long list of ancillary documents all govern the relationship between the general partner (the sponsor) and the limited partners (the investors). Key economic terms include the commitment period, the fund's term, the management fee, the carried interest split, the hurdle rate, the catch-up, and the GP commitment. We negotiate fund formation documents from either side.

Portfolio Company Governance

Once a private equity firm acquires a portfolio company, the governance structure of the portfolio company changes. The sponsor takes board seats (often controlling the board), implements monitoring agreements, requires reporting at agreed intervals, and reserves certain decisions for sponsor consent. The portfolio company management team typically rolls equity, signs employment agreements, and receives incentive equity tied to value creation. Drafting and negotiating these arrangements is a substantial part of private equity practice.

Add-on Acquisitions

Many private equity strategies involve buying a "platform" company and then making "add-on" or "bolt-on" acquisitions to build scale. Add-ons require their own purchase agreements, financing, regulatory analysis, and integration plans. They tend to move faster than the original platform acquisition because the sponsor and its legal team are already familiar with the process and the platform.

Exit Strategies

Private equity is fundamentally about exit. Common exit paths include:

• Sale to a strategic buyer. Another operating company in the same industry.
• Sale to another financial sponsor. A larger or differently positioned private equity firm.
• Initial public offering. A registration and listing on a public exchange.
• Continuation fund or secondary sale. A sale of the portfolio company to a new fund controlled by the same sponsor or to a secondary buyer, providing liquidity to the original investors while keeping the company in private equity ownership.
• Dividend recapitalization. Refinancing the company with additional debt to pay a dividend to the sponsor — not a true exit but a way to extract value before exit.

Each exit path has its own legal, tax, and timing characteristics. We help sponsors and management teams plan and execute exits.

Tax Considerations

Tax treatment is woven through every part of a private equity deal. Asset versus stock sale, Section 338(h)(10) and 336(e) elections, partnership versus C-corporation structures, qualified small business stock (QSBS), carried interest taxation, state and local tax planning, and international tax considerations all affect deal economics. We coordinate closely with tax counsel and accountants to make sure the structure is optimized for both sides.

Disputes and Litigation

Even well-papered private equity deals sometimes produce disputes — over earnouts, working capital adjustments, post-closing indemnification claims, fraud allegations, and disputes over the value of management's rolled equity. We have litigated and arbitrated private equity disputes on both sides, and we structure deal documents to minimize the chance of disputes and to provide clear paths to resolution if disputes arise.

Fees and Engagement Structure

Private equity legal work is typically billed on an hourly basis with regular reporting and budget tracking. For predictable phases — fund formation, routine portfolio company acquisitions, NDAs, and the like — capped or fixed fees are often available. We discuss the engagement structure at the outset so that there are no surprises later, and we provide regular updates on time spent and projected total fees as deals progress.

Call Our Office

A private equity law firm will assist and guide you with the structure of the transaction, from reviewing your capital structure, negotiating and drafting acquisition agreements, reviewing financing documents, and advising on tax structures and consequences. Should you need assistance, we, at the Law Offices of Albert Goodwin, are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].