Drafting docs?
Hi all,
Ignore the title (senior associate in PE).
There is a lot of focus from juniors typically on the technical aspects of the job (modelling etc.). Coming up the curve to VP, I am trying to get more involved in the drafting of docs (SHA, IA, SPA, reps, warranties, disclosures etc. ).
There doesn't seem to be a manual or tons of ready resources to train oneself in this aspect (besides papers put out from law firms which can be useful) - how did senior folks here get comfortable with document drafting, and taking commercial positions? How does one know what is commercially acceptable to their fund etc.? Really keen to understand this part of the job better (and get out of the models lol) so all advice is greatly appreciated!
There is no guide for this. A lot of it comes down to commercial acumen and is often what differentiates an associate who will or wont progress to VP. It's going to add extra work to your plate, but I'd ask your VP if you can take a first look at the documents and send your thoughts over to them. As long as you're not all under immediate time pressure, they should be able to facilitate this.
When a first draft comes through, it'll typically be heavily footnoted by the lawyers where they're looking for commercial input or instruction from their client. Go through these points and take a view on what the firm should be doing. Put in your proposed response (mark up or comment explaining how you want lawyers to respond) and discuss with your VP. You can look at similar deals for precedents, on most deals you end up arguing over the same key points so it's likely the point has been encountered and negotiated to an acceptable position before.
The best piece of advice I got from an MD when I was an associate picking up documentation was don't be afraid to ask your lawyers stupid questions. They're there to advise you on what route to take, if you don't get a point or understand what they're saying get them to break it down into easier pieces. Some lawyers will completely overengineer some points and argue over points that you as principal really don't care about, it's important not to waste time on these and focus on what really matters.
This is very good advice, thank you! Particularly on looking at precedents and the fact that key points keep coming up - certainly noticed that. Thanks!
Similar line of discussion here which might be helpful (the book I recommended is excellent as well):
https://www.wallstreetoasis.com/forum/private-equity/purchase-agreements
In addition to the above, one thing I found helpful is asking lawyers (senior associate rank) to run you 1-1 through the legal docs (SPA, SHA, any other documents) after you signed/completed a deal explaining any elements you are keen to understand. They can comment on what are standard clauses for sponsor deals, what are variations in the case of this specific deal, what were other options.
Senior associates at law firms should be keen to do that as it helps them to establish a more direct relationship with someone who might be deciding about which law firm to use a few years down the road.
Also to be as open as possible with them, ultimately there are no stupid questions and they are there to help you.
Excellent advice, SB'd.
Only thing I would add is ensuring that you build these relationships with the transactions senior associates and specialists. If you are in a regulatorily-intensive space (e.g., healthcare), finding a specialist who can translate arcane regulations into something a more junior investment professional can understand will inevitably make you look good as a VP+ (either because you know the answer to IC's question off hand or because you can text your gal/guy for a quick read on a hypothetical).
[Old guy can't reply correctly].
SRS puts out an annual deal terms study that illustrates what's market or what's not...your lawyers will of course have the most accurate pulse on what to do in the deals that your firm does, but this was a great resource for me when I was starting out.
Honestly drafting of these docs are primarily done by lawyers who know precedents for your firm. There will be the same set of key business points lawyers will ask for client input on each deal, and they will usually have suggestions based on precedents. As long as you understand them it's fine. Not really a big differentiation point to making VP imo.
I would disagree with this. We have an associate now in their 3rd year and they wont be made a VP offer. There's a few reasons why, but one of the main ones is nobody trusts them to take on documentation workstreams and they're not showing the ability to grow into these workstreams.
Not sure where the disagreement is. Of course they need to be able to take on the documentation workstream - that should be a given. I'm saying it's not difficult and thus not a differentiation point.
There is a highly recommended book for junior lawyers: Working With Contracts: What Law School Doesn't Teach You, 2nd Edition (you could also read it for free on archive.org) ~ 300 pages.
It's extremely straightforward and this should be MORE than enough for IB/PE. More so, I'm fairly confident that after reading this book you could raise some discussions or recommendations to junior lawyers and they'll think sh*t, this guy could replace me.
It's written by a former Skadden Partner, and it's slightly oriented towards banking and finance law (that's his expertise), but everything he talks about is equally applicable to any contract in any transaction setting (warranties, covenants, breaches, drafting techniques, due diligence, etc.).
What size funds are these where VP ie 3-5 years of pe experience are taking the pen on legal ? At most MFs I've seen the principal leads this with maybe some input from VP
It's less about who is holding the pen - more about proving that you can handle these workstreams / building general understanding so that when the time comes you can hold the pen, if that makes sense. At my fund and most others I have seen it is typically principal / director level that takes the lead on this (although some funds call a VP level elsewhere a principal, etc.). This is for firms with latest fund sizes of c. $5bn+
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