The Private Equity practice at Gibbons is among the nation’s busiest. In its annual rankings of the country’s most active law firms in the private equity arena, Dow Jones Private Equity Analyst, the premier industry publication, ranked Gibbons among the top 100 U.S. firms for six consecutive years, for both number of deals completed and number of funds with final closing. Gibbons was the only New Jersey-headquartered law firm to appear on both lists each year. We have a leading national practice representing public and private pension funds, institutional investors, commercial and investment banks, funds-of-funds, foundations, universities, insurance companies, family offices, and high net worth investors with their investments in private investment funds.
Moreover, the depth of our experience on all sides of private equity deals, whether for active, passive, general, or limited partners in fundraising, as well as portfolio investments and other issues, has shaped our insight into the issues that are critical to all participants and honed our understanding of the broader market picture. As a key adviser, we offer such investors a customized fund review process to identify the economic, regulatory, tax, and other issues of concern to that investor and help to resolve them. The diversity of our work and of the kinds of clients we represent has expanded our role in many of these matters, to the extent that we introduce emerging companies with capital sources and private equity funds to prospective investors. We also provide counsel on the selection of investment managers (including representing key investment executives with respect to employment departures) and on operational matters, registration and regulation, and governance. The numerous types of financing transactions we handle for broker-dealers, commodity trading advisers/commodity pool operators, and fund managers and their sub-advisers include:
- Private equity fund formation and fund investments
- Venture capital financings
- Real estate funds
- Hedge funds
- Leveraged buyout funds
- Business development companies (BDCs) and hybrid funds (whether the fund invests in equity or debt instruments, commodities, real estate, or other assets)
- Distressed investment funds
- Secondary funds
- Special situations funds
- Commodity futures funds
- Mergers and acquisitions within the portfolios
- Public offerings, initial and secondary
- Corporate partnering agreements
Our Private Equity clients look to us for service on a broad range of strategic issues, such as: succession planning; tax planning; personnel compensation and termination; admission of new members/partners; fund wind downs and dissolution; acquisitions and sales of minority and majority stakes; and the purchase by secondary investors of portfolios of fund assets. We create carried interest and revenue allocation strategies and employee co-investment programs, as well as advise on executive incentive and retention arrangements. Clients also seek our advice on mergers, acquisitions, and joint ventures involving investment fund managers and other parties in the financial services industry.
Our experience covers a broad spectrum of pooled vehicles and direct investments in the United States and abroad, including direct real estate investments and acquisitions of debt and equity securities in corporations, partnerships, and other operating entities. Our Private Equity Team advises sponsors concerning the creation of publicly-listed private equity funds and management companies. We also structure separate investment arrangements, such as managed individual accounts, for sponsors and/or small investor groups, as well as co-investment vehicles. With respect to the growing secondary market for private investment securities, Gibbons attorneys represent secondary fund sponsors in connection with the sale of such interests, as well as sponsors in connection with evaluating such transactions.
Firm-wide Resources and Interdisciplinary Services
Current Issues, Market Trends, and Service Differentiation
Whatever the private equity transaction – fund formation or passive investment, venture financing, merger or acquisition, leveraged buyout – from its earliest stages, we consider the range of corporate, tax, and risk-allocation factors in our due diligence, and we consult Gibbons attorneys from across the firm to ensure that our counsel addresses a multitude of complex issues. Throughout and as necessary, we complement our private equity counsel with tax advice, including ERISA advice, advice related to UBTI, and advice regarding PATRIOT Act and Pay to Play regulations. We carefully and thoroughly address regulatory requirements, and we additionally rely on firm-wide resources, including attorneys experienced in corporate finance, securities, governance, disclosure requirements, litigation, real estate, intellectual property, and employment law.
Gibbons’ Private Equity attorneys keep abreast of the most current industry trends, changing regulations, legislative initiatives, and case law that impact our clients’ deals. We continue to focus on the ability of LPs to disclose information relating to fund level performance, balancing the confidentiality of information against the public’s right to know. We have also become particularly adept dealing with LPs’ compliance with prohibitions on political contributions and investments in Iran and Sudan. We have particular experience in advising investors who are placing significant funds into the hands of others for extended periods with the hope and expectation of realizing anticipated long-term returns. Key considerations in these investments are trust, judgment, investment provisions, illiquidity, risk management, recourse, and key man provisions. Our strength lies with our unusual capability to fulfill comprehensively across these varied needs.
We counsel clients on a broad swath of regulatory compliance issues, including anti-money laundering, insider trading, anti-bribery, whistle-blowing, privacy laws, and a myriad of other industry matters. We are well versed in the Dodd-Frank Act and its latest regulatory changes, the Volcker Rule, and developments with respect to derivatives, both on the securities and commodity futures side. We monitor EU directives and other international trends. Several of our attorneys have in-house and government experience that enables us to offer a unique perspective on fund management’s goals and anticipate a range of issues, including operational, compliance, tax, cash flow, estate planning, succession, control, and employee separation. Our lawyers routinely interact with regulatory authorities, such as the SEC, CFTC, FINRA, and state securities regulators.
The Private Equity practice at Gibbons represents active investors, such as private equity groups, holding companies, and real estate investment groups, at all levels – from raising funds and forming funds as limited partnerships or limited liability companies, to drafting fund documentation (including term sheets, offering memoranda, partnership and limited liability company agreements, and subscription agreements), to raising capital and handling acquisitions and divestitures, to addressing securities and governance matters, to handling general operational legal work with respect to their portfolio investments.
On the passive side, including limited partner investments, we represent investors, including individuals, groups, organizations, and institutions, with respect to their making and maintaining passive investments in various investment forms, including private equity funds, private debt funds, distressed debt funds, venture capital funds, fund-of-funds, development companies under the Investment Company Act, and a variety of real estate investment structures, such as real estate partnerships, funds, and REITS, as well as other types of funds pursuing “alternative investment” strategies.
The Gibbons Private Equity practice represents private equity, real estate, and venture capital funds; fund sponsors; institutional investors; and individual investors in matters including fund formation and operation, as well as with regard to ongoing issues throughout the life cycle of the fund, up through exit strategies. We specifically advise investors on the restructuring and recapitalization of portfolio companies and other portfolio investments; the formation of real estate private equity funds, including domestic real estate funds, domestic real estate fund-of-funds, and offshore real estate funds located in Asia and Europe; and the formation of funds specializing in energy investments.
With regard to fund structures, our Private Equity attorneys draft and review limited partnership and related agreements, marketing materials, and private placement memoranda. In addition to fund formation, we advise institutional investors on the issues that impact their investments, applying the latest “market” terms for each transaction document. We take into account the SEC’s most recent regulations under the Dodd-Frank Act and JOBS Act, new swaps regulations, current FINRA rules, the Volcker Rule, and other developments in producing state-of-the-art deal documents. Our private equity attorneys are familiar with both the opportunities and the challenges inherent in different market scenarios for private investments in companies. We also work with real estate developers and commercial property owners on investments in underperforming residential and commercial real estate.
The Gibbons Private Equity practice advises and represents a diverse cross-section of fund investors, including private and governmental pension plans, hedge funds, business development companies (BDCs) and small business investment companies (SBICs) under the Investment Company Act, REITs, real estate partnerships, and high net worth individuals. Due to our extensive experience representing private equity investors over a diverse array of investment platforms, our attorneys can quickly analyze fund terms and efficiently guide clients on issues ranging from preferred returns and clawbacks to GP carry, calculations, and management fees.
Portfolio Company Transactions
Gibbons represents a diverse range of hedge fund clients, including sponsors seeking to form hedge funds, investors interested in seeding and making later-stage investments in hedge funds, and placement agents that raise capital for hedge funds. We draft offering documents (including pitch materials) for funds and review these items for investors. We have experience in the Investment Advisers Act registration and reporting requirements, as well as exemptions from registration on both the federal and state levels. Our attorneys have negotiated side letters on behalf of funds and investors, and we counsel issuers and investors with respect to disputes and regulatory actions. We also offer the suite of services available to our private equity fund clients.
The Private Equity practice handles investments in portfolio companies from numerous vantage points. We handle a broad range of buy-side and sell-side assignments involving middle-market companies, large multinationals, investment firms, development stage, and family businesses; our work includes acquisitions, divestitures, spin-offs, mergers, recapitalizations, restructurings, reorganizations, joint ventures, licensing transactions, project finance, and other corporate arrangements. For example, the group has:
- Represented portfolio companies at various stages and in various industries (including technology, telecommunications, and healthcare) in the issuance of equity interests, such as common and preferred stock
- Represented management in buyouts of portfolio companies
- Represented portfolio companies in the structuring and documentation of follow-on debt/equity investments that cram down non-participating equity holders
Tax and ERISA Implications
We advise fund sponsors on the creation and raising of a wide variety of fund types and sizes, including private equity, hedge, venture, fund-of-funds, and mezzanine and other junior capital and junior debt funds; real estate funds; turnaround and distressed funds; and BDCs and SBICs, among others. In addition to the formation of more traditional private equity funds, we represent clients in the formation of specialized vehicles to meet particular strategic or diversification needs, such as SPACs, reverse mergers, specialized debt offerings, co-investments, joint ventures, and separate accounts.
The tax attorneys in our Private Equity practice provide counsel at every stage in the life cycle of a fund, from formation and organization, to operations and investments, through exit strategies and formal wind-down and dissolution. They advise clients on any tax consideration that arises, including those impacting tax-exempt investors, relating to deferred compensation techniques, or concerning unrelated business taxable income. Equally complex issues can surface when ERISA employee benefit plans invest in private equity funds. Our ERISA attorneys help clients structure investment funds that comply with complicated requirements, attending to issues including the application of ERISA plan asset regulations; fiduciary duty standards; and prohibited transaction rules. Additionally, our ERISA team has extensive experience with pension funds and qualified retirement or governmental plans. We also counsel funds and managers on compensation arrangements structured to satisfy the nonqualified deferred compensation provisions of Section 409A of the Internal Revenue Code.
In addition, our ERISA and employment practice lawyers advise private funds and their managers on restrictions for accepting and investing pension plan money, and in connection with private fund investments. Applicable ERISA and public pension law issues that we address for our clients include, among others: fiduciary standards, plan assets, prohibited transactions, unrelated business taxable income, and other pertinent benefits and tax issues. Such advice often assists clients in complying with the so-called “venture capital operating company” exception, among other exceptions from the U.S. Department of Labor’s plan asset regulations.
Mergers & Acquisitions and Other Corporate Transactions
Emerging companies, particularly those in technology, promise exciting opportunities not just for themselves but for the investors providing their capital. Gibbons clients include venture capital firms and other private equity investors, as well as venture-backed businesses in areas such as biotech, life sciences, sustainable/"green" tech, telecommunications, and information. The kinds of deals, and the related issues, we handle with respect to venture capital and emerging companies include:
- Mergers and acquisitions
- Venture financing
- Debt financing
- Multi-investor financing
- Employment matters
- Technology licensing and protection
- Tax matters
- Corporate governance
- Strategic relationships
The Gibbons Private Equity practice represents venture capital firms in fund formation and portfolio investments, as well as with regard to issues throughout the investment cycle. For example, we have represented a large array of investors, including insurance companies, and public pension fund private investors in direct and secondary investments in private equity, venture capital, and real estate funds. Our Private Equity attorneys negotiate, structure, and close venture capital financings, joint ventures, and strategic alliances, helping our clients avoid common pitfalls while achieving favorable terms and conditions. We help with their business plans, organizational structures, and investor presentations, and we go on to provide the full range of corporate services that emerging companies require as they mature.
Private Fund Litigation
We regularly represent entities in various transactions, from traditional bank debt and institutional and non-institutional lenders to corporate/strategic acquirers; private equity, venture capital, and other individual investors; and mezzanine lender/investors. We are actively involved in cross-border and cross-ocean transactions, as well as domestic deals. As part of these activities, we represent overseas businesses engaged in U.S.-based transactions. We also structure and close corporate partnerships, collaborations, joint ventures, and strategic alliances for clients, ensuring that the agreements advance the business goals of the emerging companies and their business partners.
Intellectual Property Considerations
The Private Equity practice at Gibbons partners with the firm’s commercial litigators to handle various actions for private fund clients, including partnership disputes, class actions, contract claims, securities arbitrations, regulatory proceedings, and employment matters. Our experienced securities litigation counsel also advise clients in connection with formation and investment structuring issues with an eye towards minimizing the risk of future litigation. The size of our litigation group enables us to handle actions of any size and to effectively represent clients in virtually any venue across the country or before any regulatory body or arbitral tribunal. The firm’s Commercial & Criminal Litigation Department includes more than 90 attorneys leading major litigations throughout the U.S. with and against the country’s largest law firms in matters involving significant exposure or potential recovery. Gibbons offers our private fund clients a realistic judicial perspective provided by a formidable group of retired jurists and scores of former state and federal judicial clerks; former state assistant attorneys general and federal prosecutors; a pioneering E-Discovery Task Force; the Commercial Litigation Alert blog; Litigation Support and Knowledge Management professionals fully equipped with thought-leading resources and technology; and many other litigation services.
Benefits and Compensation Considerations
Emerging companies, private equity funds, and their partners – such as placement agents and third party administrators – face intellectual property challenges that, if not addressed properly, can derail their businesses. Our Private Equity attorneys, in collaboration with the firm’s Intellectual Property Department, help these companies to develop intellectual property strategies that protect and build up their patent portfolios and additional proprietary assets, through, for example, IP due diligence; the obtaining and protection of trademarks and copyrights; patent prosecution and interferences; and technology transfer.
Complex benefit issues, as well as executive and employee compensation questions, are inherent in such corporate transactions as mergers, acquisitions, and financings, requiring extensive due diligence investigation of benefit plans and counsel on notice and distribution issues. The Private Equity practice helps companies integrate their employee benefit plans and merge and spin-off retirement plans, satisfying all regulatory components while also optimizing the business advantages of the plans.