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Savvy PE Attys Can Cash In On Blazing Secondaries Market

June 15, 2017, Law360

Kelly Labritz and William Sturman are quoted in a Law360 article regarding the private equity secondaries market.

According to Labritz, working on secondaries transactions involves a combination of skills from multiple different practice types. In order to properly advise PE clients looking to do secondaries deals, you should be well-versed in the areas of mergers and acquisitions and private equity fund formation, she says. “It’s a blending of those two disciplines. I do know some people who are pure funds lawyers that have never done secondary transactions before, and it doesn't work out very well. You’ve also got M&A lawyers who think they can just jump in, but if you’re not very familiar with fund structures, you’re going to get lost too.” Labrtiz adds, “The days of simple, easy secondaries deals is coming to an end, and now we need to get creative."

Sturman explains, "These sales are often conditioned upon the approval of the GP. And there’s not a lot of incentive for the GP to consent.” For instance, Sturman notes, it’s reasonable for a general partner to question why they should negotiate terms at all since those terms were established at the outset of the fund and have already been agreed to by all of the other parties involved. On the flip side, however, GPs can be incentivized to accept some negotiation on terms because secondaries deals give them an opportunity to develop new relationships with investors whom they could potentially work with again down the road. “Some GPs are very accommodating, and some are not."

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