Trusted Insights recently published a blog post written by Winstead PC Shareholder Ladd Hirsch for Winstead’s award-winning Business Divorce blog. The article, titled “Looking Past the Face of the Shiny Penny—Check the Fine Print of All Private Company Investments,” focuses on the critical terms that an investor will want to secure in a company’s governance documents before actually making a substantial investment in the company. An excerpt is below:
“According to the financial press, private equity investors are holding huge sums waiting for the right private company in which to invest. In late March, CNBC reported that private equity firms have a staggering $1.5 trillion in cash on hand (more than double the amount from five years ago) and that they are actively seeking deals in the travel, entertainment and energy industries. In April, Vanity Fair stated that in each of the past four years, private equity managers have raised more than $500 billion for investment, and noted that from 2013 to 2018, more private equity deals took place than in any five year time frame in American history.
Private equity firms are not the only ones who are making investments in private companies. Angel investors and others are stepping up to fund privately held businesses, and there are many documented success stories of individual investors who have struck platinum with their private company investments. It is also true, however, that a sizable number of fast growing private companies hit the rocks and burned through all or most of the funds that were invested in them.
The purpose of this blog post is not to help pick private company winners—that is a topic for others with the ability to discern which companies have the best ideas, management teams and the staying power to succeed on a long-term basis. But picking a successful private company is only part of the story. A private company’s success will not automatically make an investment in the business a success if the company’s governance documents do not provide the investor with a measure of protection on several important fronts. This blog post therefore focuses on the critical terms that an investor will want to secure in the company’s governance documents before actually making a substantial investment in the company.”
Read the full article on Trusted Insight. (subscription required)
Read the full article on Winstead’s Business Divorce Blog.
Ladd Hirsch is a business trial lawyer with more than 35 years of experience handling complex litigation matters involving claims for breach of contract, fiduciary duty violations, fraud, theft of trade secrets, non-compete violations, and shareholder derivative claims and partnership disputes. Ladd’s litigation practice spans many different industries, including technology/computer software, oil and gas, health care, real estate, private equity investments, insurance, manufacturing, restaurants, transportation, and retail. Since the 1990’s, Ladd has focused sizable portion of his practice on representing owners and investors in Business Divorce disputes and claims arising out of their substantial ownership interests in private companies. Ladd heads up the Business Divorce practice at Winstead, and oversees the firm’s Business Divorce website and blog. Winstead’s Business Divorce practice includes assisting family law counsel in negotiating and documenting the division of marital assets between divorcing spouses who hold highly valued interests in private companies.
Winstead is a national business law firm with more than 300 attorneys who serve as trusted advisors to emerging, mid-market and large companies, both public and private. The Winstead team provides a range of core legal services that are critical to our clients achieving their business goals. Winstead’s business transactions and litigation practices serve key industries including airlines, financial services, healthcare, investment management/private equity, life sciences, real estate, sports business and universities.