Private Equity Firms Seek In-House Counsel
Although the U.S. subprime crisis has virtually halted private equity activity in the United States, recent research compiled by Deutsche Bank shows that the firms will continue to actively pursue investment opportunities. According to the report, there is a substantial amount of available capital (nearly $900 billion) ready to be deployed once markets stabilize. Despite the overhang of non-syndicated deals created by dislocation in credit markets, Deutsche Bank says that 95% of private equity portfolio assets are typically performing well and most firms believe that leveraged finance markets will reopen in the near term.
The news bodes well for the growing industry. Capital raised by buyout firms jumped 32% to $102 billion last year, up from $77 billion in 2000, according to data from Thomson Financial and the National Venture Capital Association. But according to the National Law Journal, as private equity firms broaden the scope of their investments, many are also facing more litigation. The private equity industry as a whole is becoming more litigious, Colin Blaydon, a Professor at the Tuck School of Business at Dartmouth College and Director of the school’s Center for Private Equity and Entrepreneurship, told The National Law Journal. Blaydon said that informal dispute settlement has given way to an abundance of lawsuits and trials.
As a result, a growing number of private equity firms are hiring general counsel. In fact, the National Law Journal reports that Kohlberg Kravis Roberts & Co., one of the biggest private equity firms in the world, and GTCR Golder Rauner LLC are seeking first-time general counsel. Executive recruiting firm, A.E. Feldman, also says there are increasing private equity opportunities as demand for qualified attorneys is intensifying.
Private equity firms are a huge consumer of legal services, and most consider whether to bring lawyers in-house, Robert Friedman, Chief Legal Officer at The Blackstone Group, told The National Law Journal. Friedman says more firms are concluding that they need an in-house attorney due to “the increasing complexity of our business and the increasing velocity of our business.”
Private equity lawyers are mainly concerned with ensuring that the firm’s investment is adequately protected from a legal standpoint. Their work involves advancing the firm’s investment strategies, in addition to overseeing legal compliance and managing outside law firms. They are also responsible for drawing up various investment agreements, including shareholder or subscription agreements, warranties, debenture agreements, service contracts and disclosure letters.
