New to PE -- How do I get ramped up on certain aspects of the deal process like legal docs and negotiations?
Bit of a unique situation, will expand on that but my main question is:
How do I get ramped up on specific aspects of the deal process? Specifically, the back and forth correspondence and negotiations around legal docs and, to a lesser extent, other "execution" or "process-oriented" aspects?
Coming in at VP level bc of experience but I have never been in a “grind through transactions one after another” type of role like a PE associate would over several years. As such, I lack the reps. I have been involved in M&A and cap markets deals before from the buyer / issuer perspective. Fyi I gently highlighted this as a weakness while interviewing and the response was essentially "we’re hiring you for different reasons, it doesn't take a genius, just reps, take the extra time and make the extra effort up front"
What is your background? Advice will change based on that
Short stint IB
Longer stint ER
Two large portcos in VP Finance/CFO type roles
Ah, swinging from the trees into the concrete jungle of PE, are we? Well, let's get you swinging like a champ through those legal docs and negotiations. Here's how you can get ramped up:
Precedents: Start by reviewing contracts from deals that have recently closed. This will give you a sense of what terms are considered "market" and provide a benchmark for your own negotiations and document reviews. As you gain more experience, you'll be able to draw from your own deals as references.
Search Techniques: Get familiar with the documents by running searches for key terms:
Networking Capital Peg: Understand the negotiation levers for the networking capital peg. Know the typical positions buyers and sellers take, what's considered market, and the financial impact of these terms.
Materiality Thresholds: Learn about the materiality thresholds that govern disclosure schedules. This will help you understand what contracts the buyer will want to see and why.
Negotiation Skills: To sharpen your negotiation skills, remember that a solid understanding of the legal documents is crucial. Recognize that many negotiation points are common across deals, and both sides will have standard arguments. Experience and practice will help you anticipate these and negotiate effectively.
WSO Courses: Consider diving into some of the WSO courses or bootcamps that cover aspects of the PE deal process, legal documentation, and negotiations. These can provide structured learning and practice opportunities.
Remember, your firm believes in you and your unique skills. They're right; it's not rocket science, just reps. So, take the time to learn, ask questions, and soon you'll be navigating the PE deal process like a pro. And if you ever feel like you're in a jungle of legal jargon, just remember, every champ was once a chimp that decided to climb. Keep climbing!
Sources: How to Read a Legal Doc Like a Champ, How to Read a Legal Doc Like a Champ, https://www.wallstreetoasis.com/forum/private-equity/then-and-now-compbanker?customgpt=1, Intro to M&A deal docs
Oh man. Got the Bot. A nice bot but still a bot. One shameless bump and I will crawl back into my hole.
Bump - Gotta know too :)
Ultimately I think it's correct that the majority of your learning will come from deal reps, but if your PE fund has a specific law firm they typically use for transactions you could try to reach out to your contact there to see if they have any educational material to share with you - think most of the big law firms have some sort of legal doc overview type material
Why do you need to know this? Everything technical is handled by lawyers and everything else is either handled by bankers of there are precedents
PE folks need to understand legal docs dude. They have to live with the document if stuff goes wrong or if business terms aren’t codified according to what was intended.
Lawyers move onto the next deal. Deal docs stay with the PE/portfolio company.
There are relatively material commercial terms in docs that you generally need to know how to negotiate.
Both from the actual buying of the business and the financing of the business.
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