Drafting and negotiating ancillary documents to the equity component in a private equity buyout transaction
Drafting and negotiating ancillary documents to the equity component in a private equity buyout transaction

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Drafting and negotiating ancillary documents to the equity component in a private equity buyout transaction
  • Loan note instrument
  • Board minutes and members' resolutions
  • Deed of contribution
  • Equity warrant

This Practice Note is part of the Lexis®PSL Corporate private equity buyout transaction toolkit.

In order to effect all aspects of the equity component of a private equity buyout transaction, an investment agreement (IA) will require that certain ancillary documents are prepared (some of which will require more negotiation than others). These ancillary documents will either be drafted by the corporate lawyer drafting the IA, or by a more junior colleague. Some will be entered into upon exchange and some upon completion (depending on whether or not these occur simultaneously).

Depending on the structure of the buyout vehicle established by the private equity investor, ie the newly incorporated company or companies formed by the investor to acquire the target company, these documents will either be entered into by the newco acquisition vehicle, ie the entity acquiring the target company, or its ultimate parent company. References to ‘newco’ below therefore refer to the company in which the investor and the managers will make their equity investments, ie subscribe for securities, which may be either the newco buyer or a newly incorporated parent company of such buyer.

Ancillary documents include:

  1. loan note instruments (where part of the investment by the investor and, in some cases, target management is to be satisfied with the issue of loan notes by newco)

  2. board minutes (newco will need to hold