The financial crisis, the dimensions of which came to light beginning in 2007 as a result of the collapse of the Lehman Brothers investment bank, has also left its mark on the world of private equity transactions. The term "private equity" is initially understood to mean classic M & A transactions, i.e. acquisition of a target company by a financial investor (private equity investor). These should be distinguished from strategic investors, i.e. commercial enterprises which themselves operate in the market for goods or services and which wish to expand their range of business by acquiring a further company.
A major element of any private equity transaction is the manner in which the purchase price for the target company is raised, which is a characteristic of this type of transaction. Financing of this kind is, as a rule, raised through syndicated loans, which are secured by the assets of the company being acquired. Repayment of the syndicated loan is then, at least in part, funded by the profits of the acquired company during the post-acquisition period (leveraged finance). As a result of the financial crisis, precisely this form of financing has become more difficult. Legal advice on such transactions requires creativity and commitment to the client's needs.
In addition to the specialist knowledge our partners bring to the table when advising clients on an M&A transaction, advising on syndicated financing also requires knowledge of the relevant, specific financing documentation consisting, firstly, of voluminous loan agreements and, secondly, of characteristic security arrangements for the lenders, by which claims, assets and, for instance, shares in the company are transferred or pledged as security to the financing banks.
The term "venture capital" is understood to mean the provision of financial support and investment in what is typically a new, growing company, and is provided without ordinary bank security, typically in exchange for an equity interest in that company. Such equity interests are sometimes also accompanied by further financing instruments such as loans or silent partnerships.