Cover -- Half-title -- Title -- Copyright -- Contents -- Figures -- Foreword -- Preface and acknowledgments -- Table of cases -- 1 An introduction to private equity -- 1 Introduction -- 2 Background to private equity in the UK -- 2.1 What is private equity? -- (a) Management buyouts (MBOs, or buyouts) -- (b) Management buyins (MBIs) -- (c) Leveraged buyouts and institutional buyouts (LBOs/IBOs) -- (d) Venture capital -- (e) Growth capital and development capital -- (f) Secondary buyouts -- 2.2 The emergence of private equity -- 2.3 Types of private equity investor -- 2.4 Sourcing the deal -- 3 The Business Plan and financial returns -- 3.1 General -- 3.2 Business Plan contents -- 3.3 The financial model -- 3.4 Investor returns -- 4 Conclusion -- 2 The deal process and preliminary matters -- 1 Introduction -- 2 The deal process: an overview -- 3 Preliminary matters -- 3.1 Engaging advisers -- 3.2 Engagement letters -- (a) Limitations on liability -- (b) Proportionality -- (c) 'Hold harmless' provisions -- 3.3 Heads of agreement and exclusivity -- (a) Confidentiality -- (b) Exclusivity -- (c) Costs underwrites and indemnities -- 4 Due diligence -- 4.1 Overview of due diligence -- 4.2 Vendor due diligence and data rooms -- 4.3 Legal due diligence -- (a) Constitutional matters and accounts -- (b) Contracts and trading -- (c) Licences and consents -- (d) Assets -- (e) Employees and pensions -- (f) Investigations, disputes and litigation -- (g) Intellectual property -- (h) Property and environmental -- 4.4 Financial due diligence -- (a) Historic trading and net assets -- (b) Business operations -- (c) Accounting procedures -- (d) Management/staff review -- (e) Tax due diligence -- 4.5 Other due diligence -- 5 Conclusion -- 3 Transaction structures and deal documents -- 1 Introduction -- 2 A typical MBO/MBI deal structure -- 2.1 A simple structure.

2.2 The players and their instruments (risk and return) -- (a) The senior lender -- (b) The investor -- (c) The managers -- 2.3 Multiple Newcos -- (a) Multiple Targets -- (b) Structural subordination -- (c) Tax: loan note interest -- 2.4 Higher leverage: junior debt -- 3 Some common issues on deal structuring -- 3.1 Pricing the equity: the safe harbour -- 3.2 Ratchets -- 3.3 Multiple investors: understanding the parties -- 3.4 Investor/management fees -- 3.5 Secondary buyouts and other 'rollover' sellers -- 4 The deal documents -- 4.1 The acquisition documents -- 4.2 The equity documents -- 4.3 The debt documents -- 5 Conclusion -- 4 Acquisition issues -- 1 Introduction -- 2 The acquisition agreement -- 2.1 Parties -- 2.2 Price and price adjustment -- (a) Completion accounts -- (b) Locked box mechanism -- (c) Earnouts and similar arrangements -- 2.3 Other risk allocation during negotiation -- 2.4 Retention accounts -- 2.5 Conditionality -- (a) Competition clearances -- (b) Shareholder approval -- (c) Tax clearances -- (d) Other regulatory approvals -- 2.6 Consequences of conditionality -- (a) Conduct of Target during the delay -- (b) Risk in the business during the delay -- 2.7 Warranties, indemnities and risk allocation -- 2.8 Warranties and knowledge/awareness -- (a) Awareness of the seller -- (b) Awareness of the buyer -- 2.9 Limitations -- (a) Monetary limits -- (b) Time limits -- (c) Conduct and the right to fight -- (d) Other typical limitations -- 2.10 Restrictive covenants and confidentiality -- 2.11 Assignment -- 3 Disclosure and the disclosure letter -- 3.1 Disclosure: principles -- 3.2 The acquisition disclosure letter -- (a) General principles/interpretation -- (b) General disclosures -- (c) Specific disclosures -- 4 Competition matters -- 4.1 Introduction -- 4.2 Typical issues for private equity transactions -- 4.3 Which rules apply?.

4.4 UK merger control legislation -- (a) Ceasing to be distinct (control) -- (b) Threshold tests -- 4.5 Notification: voluntary system -- 4.6 EC merger control legislation -- (a) What is a concentration? -- (b) A Community dimension: the turnover threshold -- 4.7 Relevant turnover -- 4.8 Notification: mandatory system -- (a) Phase 1 investigation -- (b) Phase 2 investigation -- (c) Substantive test -- 4.9 Appeals and jurisdiction -- 5 Tax -- 5.1 Background -- 5.2 Matters covered by tax covenant -- 5.3 Limitations in the tax covenant -- 5.4 Tax covenant on a private equity acquisition -- 6 Conclusion -- 5 Equity documentation -- 1 Introduction -- 2 Equity offer letter -- 3 The investment agreement -- 3.1 Background and parties -- 3.2 Conditionality -- 3.3 Completion -- 3.4 Investment agreement warranties -- 3.5 Interaction between investment agreement warranties and acquisition agreement warranties -- 3.6 Warranty limitations and defences -- 3.7 Restrictive covenants -- 3.8 Confidentiality obligations -- 3.9 Board composition -- 3.10 Board committees -- 3.11 Information -- 3.12 Investor consents -- 3.13 Investor fees and expenses -- 4 Articles of association -- 4.1 Background -- 4.2 Share structure and core share rights -- 4.3 Voting -- 4.4 Dividends -- 4.5 Return of capital and allocation of sale proceeds -- 4.6 Ratchet -- 4.7 Share transfer: background -- 4.8 Permitted transfers -- 4.9 Voluntary transfers -- 4.10 Compulsory transfer -- 4.11 Compulsory transfer on cessation of employment ('leavers') -- (a) Conduct -- (b) Vesting -- 4.12 Warehousing -- 4.13 Drag and tag -- (a) Drag rights -- (b) Tag rights -- (c) Threshold -- (d) Interaction with pre-emption rights -- (e) Treatment of non-cash consideration -- 4.14 Directors: appointment, removal and conflicts -- 4.15 Quorum -- 4.16 Class rights for investors -- 5 Investment disclosure letter.

6 Loan note instrument -- 6.1 Form of instrument/loan notes -- 6.2 Yield and repayment -- 6.3 Events of default -- 6.4 Transfer of notes -- 6.5 Changes to the loan note instrument and consents -- 7 Conclusion -- 6 Debt funding -- 1 Introduction -- 2 Debt finance in private equity transactions: an overview of recent history -- 2.1 Why seek debt finance? -- 2.2 What was the benchmark funding package in the early part of the new millennium? -- 2.3 Growth market, increased liquidity and rising borrower power? -- 2.4 The crunch point -- 2.5 So, what now? -- 3 Overview of debt funding -- 3.1 Debt structures -- 3.2 Scoping the debt funding requirement -- 3.3 The financing process -- 3.4 Finance: bilateral, arrange-and-underwrite, or club? -- 3.5 Due diligence on the Target -- 4 Financing documentation -- 4.1 Senior Facilities Agreement -- (a) Facilities available -- (b) Drawdown period(s) -- (c) Repayment and interest terms -- (d) Mandatory prepayments -- (e) Representations and warranties -- (f) Positive and negative undertakings -- (g) Financial covenants -- (h) Events of default -- 4.2 Mezzanine facility documents -- (a) Mezzanine Facility Agreement -- (b) Mezzanine warrants -- 4.3 Intercreditor Agreement -- 5 Security requirements of funders -- 6 Alternative financing structures for larger transactions -- 6.1 Background -- 6.2 Bridge debt -- 6.3 Structural subordination -- 7 Conclusion -- 7 Employment-related issues -- 1 Introduction -- 2 Employment terms -- 2.1 Introduction -- 2.2 Notice -- 2.3 Garden leave -- 2.4 Payment in lieu of notice -- 2.5 Grounds for summary dismissal -- 2.6 Restrictive covenants -- 2.7 Remuneration and benefits -- 2.8 Other terms -- 3 The interaction of service agreements and leaver provisions -- 3.1 General -- 3.2 Unfair dismissal -- 3.3 Wrongful dismissal -- 3.4 Summary dismissal -- 3.5 Constructive dismissal.

4 Employment issues on termination -- 4.1 Types of claim -- 4.2 Discrimination claims -- 4.3 Whistleblowing -- 4.4 Compromise agreements -- 5 Employee incentives -- 5.1 Introduction and purpose -- 5.2 Possible structures: an overview -- (a) Share option arrangements -- (b) Share award plans -- (c) Cash-based arrangements -- 5.3 Key issues to consider with all incentive arrangements -- 5.4 Issues on exit -- 6 Conclusion -- 8 Pensions -- 1 Introduction -- 2 Key issues and principles -- 2.1 Types of pension scheme -- 2.2 Pension scheme funding -- 2.3 Section 75 debts -- (a) Pre 6 April 2008 -- (b) Post 6 April 2008 -- (i) Scheme apportionment arrangements -- (ii) Regulated apportionment arrangements -- (iii) Withdrawal arrangements -- (iv) Approved withdrawal arrangements -- 3 The Pensions Regulator and 'moral hazard' -- 3.1 The Pensions Regulator and the Pension Protection Fund -- 3.2 Contribution notices -- (a) Pre 14 April 2008 -- (b) Post 14 April 2008 -- 3.3 Financial support directions -- 3.4 Clearance -- 3.5 Associates and connected persons -- 4 Private equity transactions -- 4.1 Introduction -- 4.2 Issues when acquiring a Target which is a participating employer -- (a) The section 75 debt -- (i) Target pays the section 75 debt in full -- (ii) Seller pays or procures payment of the section 75 debt in full -- (iii) Target pays the section 75 debt in part -- (iv) Target continues to participate in the seller group scheme after completion -- (b) Other provisions imposing liability -- (c) Moral hazard issues -- (d) What future service benefits will be provided? -- (e) Past service transfers -- 4.3 Target has its own pension scheme -- (a) Agreeing the implications for the price -- (b) Funding obligations of Target going forward -- (c) Additional due diligence -- (d) Moral hazard -- 4.4 Target is acquired as an asset purchase.

4.5 Issues during ownership and on exit.