Government support: Private equity-backed companies with up to 15,000 employees can apply to the Federal Reserve’s Main Street Lending Program, writes our Buyouts Insider colleague Teddy Grant. Teddy takes a look at some of the other relevant changes made to the program last month, which Fed chair Jerome Powell said he hopes will launch at the end of May.
Guide to GP liquidity solutions: Yesterday we included the first of four installments of Proskauer’s upcoming guide to GP-led liquidity solutions. Today, part two: tender offers.
Solution: Tender offer
One or more secondary buyers (which may include existing LPs) offer to purchase limited partner interests of the existing fund from existing LPs at a set price.
Scenarios for use:
1) Provides existing LPs with a liquidity option.
2) As compared to a fund restructuring, a tender offer is a simpler method of providing LPs with liquidity (ie, typically no new vehicle to be structured, less likely to involve a negotiation of new terms).
3) Provides the fund with fresh/patient investors not pressing for liquidity.
4) May also offer the GP access to additional capital if the tender offer is combined with a stapled primary commitment to a new vehicle
1) Decreased GP control over the process may make it more difficult to manage investor expectations and negotiations.
2) LPs may be unresponsive, making it less certain that a critical mass of selling LPs will be achieved for the transaction to be worthwhile for the buyer(s).
3) Changes to terms of the fund not common.
4) Conflict and disclosure issues if buyer is also making a stapled primary commitment to a new vehicle.
5) Attention should be paid to tender offer rules and regulations, some of which may be applicable to tender offers for fund interests.
Email prepared by Graham Bippart