The following Tax guidance note Produced in partnership with Emily Clark of Travers Smith provides comprehensive and up to date legal information covering:
This Practice Note provides an introduction to the structure of a typical onshore private equity fund. In particular, it explains:
what a private equity fund is
who the investors in a private equity fund typically are
how a typical onshore private equity fund is structured, and
the terms that might be agreed with investors
This Practice Note does not deal with regulatory matters.
A private equity fund provides finance to unlisted companies in return for an equity stake in their business. Most, but not all, private equity funds aim to acquire a majority stake so that they can work alongside the company's management team to achieve growth.
A typical onshore private equity fund will have a limited life of around seven to ten years. During the first four to six years of the fund's life (usually referred to as the 'investment period') its focus is on identifying and making investments. As the fund's term draws to an end, it will need to exit its investments and may achieve this through:
listing the company's shares on the public markets
selling the investment to:
the management team responsible for that investment—known as a management buyout (for more details, see Practice Note: Tax on management buyouts—background)
another trade buyer—known as a trade sale, or
another private equity fund—known
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