Hello Monkeys
I am finally making the transition from excel / IC memo monkey to higher level deal execution processes like JV docs. Does anyone have any helpful reference materials for things to look out for when negotiating / reviewing JVs? Speaking from an LP perspective.
Thanks!
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I don't unfortunately. From negotiating these the upside is important, but those are generally easy to align/negotiated up front. What I would spend my time on is thinking about if things go wrong, and how to protect yourself, because that's when interests don't align.
Hopefully you have some experienced seniors that you can listen to on negotiations before you have to lead, because what they focus on is what you should be focusing on.
A couple things we've been burned by:
1) how to handle capital calls for overages/shortfalls. How punitive is it if someone doesn't fund? Does the additional equity have priority over the initial equity? Is it pro rata?
2) Control Rights - how easy is it to kick someone out if they're not performing. As an LP you want this to be as easy as possible.
Agree with this. I think a lot of GPs focus on how much of the economics they can cut themselves and don't focus enough on what happens when things break down. Termination rights (with or without cause), dilution on unfunded capital calls, what gets included in reserved matters (requires agreement of both GP and LP) etc are all very important. When you're negotiating a point, approach it from the lens of "how can I get fucked here?", and try get it to a point where you can only get fucked if you were acting unreasonably / unprofessionally.
As a start, I'd pull as many JV HOTs you can find on your internal drive and go through them thoroughly to make sure you understand the key concepts. You'll end up arguing the same points in future. Once you do start negotiating them yourself, don't be afraid to ask your lawyers stupid questions. They're there to advise you.
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