Sweet equity definition

View the related practice notes about Sweet equity

Transaction structure issues to consider in private equity buyout transactions

Transaction structure issues to consider in private equity buyout transactions This Practice Note is part of the Lexis+® UK Corporate private equity buyout transaction toolkit. At the outset of a private equity buyout (MBO) transaction, the main issue for the parties and their advisers to address, apart from price and equity interests, is what structure will the transaction take. Usually a new company formed by the investor (ie a newco) will acquire the entire issued share capital of a company (share purchase) or acquire a business as a going concern, together with certain of its assets (asset purchase) and, at completion, the investors and managers (ie management members of the target company/business) will subscribe for their relevant equity interests in newco, or a holding company of newco (depending on the proposed equity structure). See Practice Notes: Structure of a buy-out and Stages of a buy-out. Another fundamental issue to address at the outset is whether the seller and target management are only in negotiations with one...

Private equity financing—equity

Private equity financing—equity The way in which a private equity investment is structured and the terms and conditions of the investment will vary in nature and complexity depending on the type and size of investment. Other key issues for a private equity investor will usually include: • allowing management to run the business but with the investor retaining full access to management, the business records and other information • the ability to take control of the management of the business if necessary, and • exiting the investment for a profit (measured as an internal rate of return (IRR) or investment multiple) usually after three to five years (see Practice Note: Private equity investment—firms and funds) Broadly this will be achieved by a combination of careful structuring of the investment and clarity in the equity documentation as to the rights and obligations of all parties. It is important that, at the outset, all parties take tax advice on the structure and proposed investment generally, as even slight variations can...