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Sebastian Hayes

While the idea of a private equity firm is a relatively new concept, its methods such as growth capital, distressed situations, leveraged buyouts and more are nearly as old as capitalism itself. That being said, the private equity firm of today started taking shape in the US during the 1940’s and just like when private equity required a new kind of businessperson, it also began to breed a different type of lawyer.  

What is Private Equity?

The most simplistic definition of private equity is that it is equity held in a private business. Private Equity firms identify businesses where they see the potential for growth, invest to gain equity in the organisation and then reap the return upon selling. Many believe that private equity is thusly named because these firms only invest in private companies and while this is true, the reason for the name actually refers to how they garner investment capital – privately, not publicly. Another important distinction is that between private equity and venture capital firms who mainly invest in startups and seldom purchase the entire organisation while private equity firms work with more mature businesses and almost always purchase at least a controlling interest, if not the entire business. Generally, these investments tend to be for a finite period of time with the bulk of investments maturing in 3 to 7 years after growth has been accelerated and the company is sold again or made public.

How do lawyers fit in?

Private Equity lawyers will be involved in a wide variety of matters that can be basically split into two broad categories: Corporate Transactions and day-to-day matters. Corporate transactions navigate the terms and conditions of the original investment and any additional acquisitions made by the business throughout while day-to-day matters can involve a wealth of responsibilities but often concerns equity management, organising management change or refinancing business debt.

As the legal market is changing there has been a significant shift of lawyers moving from private practice to in-house positions and this is very reflective in the private equity space. Not only do companies see the value of having an in-house legal function as an essential part of their business, but when working with external counsel they are able to clearly and concisely translate this to the company in a commercial and digestible manor.

How do private equity lawyers differ?

A new mould has been cast for Private Equity lawyers and those with an M&A background who are commercially minded will fit best. Lawyers in this space arguably operate more as part of the business than any other sector meaning they must be personable, energetic and driven to operate effectively in this fast-paced, often stressful, but ultimately rewarding ecosystem. This close connection with the business require a private equity lawyer to possess the skills to build strong rapports with internal and external stakeholders alike. This also means that not only do these lawyers need to be technically sound, but also possess commercial expertise and acumen given that their role will be client facing and solving complicated business problems.

Another aspect of the position that sets a private equity lawyer apart from the legal pack is their versatility and knowledge of specialised financial roles which can include but aren’t limited to advising on the incorporation of entities, its structure and formation, tax, audits, compliance and regulations.

Private Equity lawyers wear many hats and build long-term relationships with clients, they are an integral part to not only the business of private equity performs and functions, but subsequently have a much broader reach to business and society as a whole. This may seem like I am overmagnifying the reach they have but I shall give an example. Many private equity companies now operate under ESG (Environmental, Social & Governance) standards, this means that any companies that they invest in despite the fact they are fundamentally in it to make money, not only become more successful and profitable but also have these values injected and ingrained into policy. This not only benefits wider society on a ESG level, but given the modern era where companies create products and services that make peoples lives easier and more comfortable, one could argue that lawyers in private equity are a direct contributor to this. 

Posted 09/03/2023 By Sebastian Hayes

Sebastian Hayes


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