Private Equity Fundraising - [PDF Document] (2022)

THE GUIDE TO PRIVATE EQUITY FUNDRAISING

EDITOR: MVISION PRIVATE EQUITY ADVISERS LIMITED

THE GUIDE TO PRIVATE EQUITY FUNDRAISING

Contents

7

IntroductionAllan Cooper and Mounir Guen, MVision Private Equity Advisers Limited

41 Selecting and working with a placement agentAllan Cooper, MVision Private Equity Advisers Limited

11 Investors in private equity: an overviewJohn Barber, Managing Director, Helix Associates

Investors in private equity - an abbreviated history Investor profiles Final thoughts

GP objectives: what are the reasons for using a placement agent? How to select the right placement agent The cost The role of the placement agent before, during and after the fundraising Different types of placement agent So, who selects whom?

21 Selection of a lawyerJosyane Gold, Partner, SJ Berwin

45 Ten things to expect from a placement agentChristoffer Davidsson, Principal, Campbell Lutyens & Co. Ltd

(Video) The Private Equity Case Study: The Ultimate Guide

3

Why do you need a lawyer? Which law firm? Selecting a law firm Due diligence on the lawyer and by the lawyer Objectives and terms when mandating a lawyer Raising the fund Conclusion

Overview Deliverables Summary

51 Notes to a placement agreementPrivate Equity International

27 Private equity fund structuringJason Glover, Nigel Hatfield and Matthew Judd, Private Funds Group, Clifford Chance LLP

Introduction Basic structuring considerations Types of vehicle Specific investor issues Conclusion

Introduction Key sections Compensation Confidentiality Conflict of interest Other items Annexes

THE GUIDE TO PRIVATE EQUITY FUNDRAISING

57

The offering memorandumBridget Barker, Partner and Stephen Sims, Senior Solicitor, Macfarlanes

85

Preparation of the Limited Partnership AgreementJonathan Blake and Jeanette Thompson, SJ Berwin

(Video) Chris Douvos: Limited Partners and Funds of Funds

Introduction Content of the offering memorandum Terms of the offering Verification Regulatory overview

Importance of the Limited Partnership Agreement Key clauses in a Limited Partnership Agreement Negotiating issues for the Limited Partnership Agreement Jurisdictional issues Tax issues Information table

67

Presenting the proposition: planning and executing the fundraisingRobert E. Mast, Managing Director, Monument Group

99

When things go wrongPrivate Equity International

4 73

Planning and preparation pay off Executing on the plan - practicalities of the fundraising process Approaching the closing After the closing Final thoughts

Market factors People factors Information factors Campaign factors

107 SURVEYS 108 LP attitudes to fund terms and conditionsPrivate Equity International

Due diligence on the fundJens Bisgaard-Frantzen, Managing Partner and Vibeke Wounlund, ATP Private Equity Partners

About ATP Private Equity Partners Investment strategy and fund types ATP PEPs due diligence strategy and process Five focus areas Investment process Key focus areas: track record, team, strategy, process and terms and conditions Track record From concrete track records to qualitative assessments Strategy, process and philosophy Team Consistency Reference checks Terms and conditions Due diligence and the manager

(Video) E27 Replacing PDF attachments one Docsend at a time with founder and CEO Russ Heddleston

Introduction Overview Relative importance of different terms General partner commitment levels Management fees Transaction fee and other income Carried interest provisions Keyman

RESEARCH GUIDE

122 LP attitudes to investor relations and reportingPrivate Equity International

151 DIRECTORY Private equity software providers Other technology providers Fund administrators and outsourcers

Introduction Levels of contact Channels of communication Benefits of contact Importance of contact The annual limited partner meeting Other contact Reporting The dedicated investor relations officer

165 CONTRIBUTOR BIOGRAPHIES 171 APPENDICES 172 Appendix One:Private Equity International on fund administration and technology

135 CASE STUDIES 136 The new concept fund: Accession MezzanineCapital LPChristiian Marriott, Director, Investor Relations, Mezzanine Management UK Limited

186 Appendix Two:Private Equity International on fundraising

204 Appendix Three:Private Equity Manager on fundraising

217 Appendix Four: 138 The first time fund raise: Altor 2003 FundJohn Barber, Managing Director, Helix Associates PrivateEquityOnline.com on fundraising

5

224 Appendix Five: 140 The debut US mid-market fund: ArsenalCapital Partners LPTerry Mullen, Co-founder and Managing Director, Arsenal Capital Partners About Private Equity International

(Video) WHAT LICENSES DO YOU NEED FOR YOUR FUND?

225 Appendix Six:About Private Equity International Books

142 Fundraising for the semi-captive: The HSBCPrivate Equity European LPVince OBrien, Director, Montagu Private Equity Limited

145 The mezzanine fund: Indigo Capital IV LPChristopher Howe, Director, Indigo Capital Limited, London

148 The biotechnology fund: HealthCap IVAnki Forsberg, Partner, HealthCap

THE GUIDE TO PRIVATE EQUITY FUNDRAISING

Chart Two: Strategic Allocation to Private Equity by Type of Organization (North America)Organization (North America)16% 14% 12% % of Total Assets 10% 8% 6%4.3% 6.7% 7.3% 6.3% 4.9% 7.1% 7.7% 5.6% 6.1% 5.9% 10.9% 13.8% 12.8% 14.4% 14.2%

essarily lead to top-notch results. Given the importance of careful manager selection, a private equity fund portfolio needed to be properly run, either by dedicated in-house professionals, or with the advice of external consultants or asset managers, all with sufficient experience to ask the right questions about nontraditional offerings. In practical terms, many institutions in the mid-to-late 1990s decided they could therefore afford to increase private equity exposure to levels not thought possible before ranging up to 25% of assets in some endowments case, but settling on a typical aspiration of 5% of assets for a mainstream institution with a conventional asset-liability profile. At the same time, institutional investment staffs began as a matter of routine to include full-time private equity fund selection specialists. Established fund of funds managers also benefited handsomely through growth in their assets under management, as institutions concluded that private equity was either too demanding or timeconsuming a business for them to handle in-house. Many new fund of funds businesses responded to market opportunity and started life in this period. Chart Two (drawn from the Goldman Sachs / Russell report) shows the growth in private equity allocations among North American institutions from 1995 onwards, broken down by type of institution. Endowments and foundations in the survey, taken as a whole, recorded by the turn of the 21st century an allocation to private equity of over 14% of assets (up from 10% in 1995), taking advantage of their ultra long-term investment horizons. Corporate pension plans demonstrated less rapid growth, but nonetheless had allocations to private equity approaching 8% by 2003, well above the 5% considered necessary for an impact to be felt on overall results. Public pension plans, which controlled the lions share (68%) of the capital among survey respondents, provided the real growth in absolute amounts committed to the asset class. By lifting private equity allocations by about 50%, from just above 4% in 1995 to nearly 6% in 2003, public pension plans were the major drivers of the markets growth, supplying tens of billions of dollars of incremental financing for private equity funds.

4% 2% 0% Endowment/Foundation Corporate Public

1995

1996*

1999

2001

(Video) Link'n Learn - Private Equity, Property Funds & Real Estate

2003

* Arithmetic average of 1996 strategic allocations of 1999 survey respondents Source: Goldman Sachs International / Russell Investment Group "Report on Alternative Investing by Tax-Exempt Organizations 2003"

Chart Three (again from the Goldman Sachs / Russell report) demonstrates the transformation of private equity in Europe from a position of near-irrelevance (1.9% of all European survey respondents assets in 1996) to one requiring attention and influencing returns (4.0% of assets in 2003, forecast to rise to 4.5% in 2005). By 2003, despite the UKs pre-eminent position as a headquarters for private equity investing activity in Europe, Continental European institutions had outstripped their UK counterparts in their allocations to private equity. While understandably employed in the Report, Continental European is too general a term to apply, thanks to significant regional variations in commitments to private equity. Countries in Northern Europe with either mandatory or well-funded pension regimes, such as The Netherlands and those of the Nordic region, contributed disproportionately to the numbers. Meanwhile, the more Latin part of Europe (France, Italy and Spain, with largely state-sponsored provision of retirement income) barely registered as sources of capital for private equity in comparison with their relative GDPs. In other parts of Europe, such as Germany and Switzerland, innovative asset-gatherers designed private equity fund of fund vehicles that utilised capital guarantees and tiering structures to preserve capital, in the process obtaining investment grade credit ratings. They proved more imaginative than many US counterparts, whose appetite for capital could be satisfied by conventional sources, and managed to secure commitments from investors previously considered next-to-impossible to convert to the private equity gospel. These converts included fixed incomeoriented and capital preservation-sensitive institutions such as German insurance companies. These risk-averse players were prepared to commit to these new pooled private equity vehicles because of the promised return of capital they

Videos

1. Link'n Learn - Introduction to Private Equity - Deloitte Luxembourg
(Deloitte Luxembourg)
2. The Boom in Private Credit
(Goldman Sachs)
3. Transactional KYC compliance for Private Equity managers
(Lawson Conner)
4. Private Equity: Perspectives of Limited and General Partners - Jean-Marc Cuvilly, Triago
(Wharton School)
5. Link'n Learn - Private Equity, Property Funds, Real Estate and Infrastructure Funds
(Deloitte Luxembourg)
6. Private Equity: Industry Review - Ed Mathias, The Carlyle Group
(Wharton School)

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