Private Equity Fund Formation 2009 'At Market' Deal Terms

This article discusses current 'at market' deal terms

for 2009 vintage private equity funds. In today's difficult

economy, pension funds and fund managers are focusing on different

issues than in past years. We expect an evolution in key limited

partnership deal terms in response to current market

conditions.

In the current economic environment the business issues which

arise in the course of negotiating the documentation governing new

Funds, as well amending existing Fund terms, will be different than

in the era of easy and cheap credit which fueled the leveraged

buyout boom of 2002-2007.

There are currently 1600 private equity Funds in the market

looking for $900 billion of new funding (Preqin statistics). At the

same time, successful fundraising is down dramatically, falling

over 75% in the last quarter of 2008 relative to the same period in

2007. In 2009 expect tough bargaining between sponsors and

investors over the terms of new investments and amendments to

existing Fund terms.

Incentives And Alignment Of Interests

The key to establishing a successful private equity Fund is

strict adherence to the private equity business model. Properly

crafted, a good private equity deal is struct...

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