If you are planning to go public. If a private equity firm is planning an IPO, the General Counsel can play a central role in navigating the process as well as putting in place the compliance and securities governance infrastructure required after the IPO. Sheppard Mullin`s private equity team is focused not only on providing the highest quality legal services to our private equity clients, but also on understanding all relevant aspects of our clients` business. Private equity clients looking for practical, fully engaged and dedicated problem-solving advisors and not just lawyers choose us. Private equity firms are advised to dedicate in-house legal resources dedicated to their portfolio companies, regardless of the size of the investment or the type of company in which the private equity fund is invested. Corporate counsel can manage legal risks identified in due diligence prior to the acquisition and not mitigated prior to the closing of the first transaction. This has the obvious advantage of avoiding that these risks have a negative impact on the future exit of the private equity fund. TPG Capital, the firm`s private equity arm, hired Deirdre Harding, former assistant general counsel at Goldman Sachs Group Inc., a new general counsel last year. Costs are also an issue. Management consultants can manage and mitigate legal risks much cheaper than hourly external consultants. Since in-house counsel traditionally earn a salary with a bonus tied to the company`s performance, not only are the incentives better aligned with those of the holding company, but the compensation is also more manageable than invoices for outside lawyers. It is simply not cost-effective to hire outside lawyers to manage most of the legal risks that holding companies face.

Risk is inherent in any commercial and entrepreneurial transaction. There is simply no way to completely eliminate the risk, and even if it were possible, eliminating the risk would not be practical. However, an effective business advisor can manage and mitigate risks at an appropriate level. Other members of a management team and private equity managers are not trained in the same way in risk management. Instead, the value of equity is best supported by management, which focuses on other important tasks such as sales, operations, finance, and marketing. Not taking bribery and corruption seriously can be a costly mistake. GC explores the methods used by legal and compliance teams to control enforcement systems. Sorkin didn`t receive a stock premium in 2020 or 2019, according to the New York-based private equity firm, which raised record amounts of cash last year and bet on the tech sector. Downsizing comes with legal complexity and often leads to sensitive labor law and termination/termination issues that require careful handling by a general counsel with litigation and labor law expertise. On the other hand, some private equity firms grow rapidly through mergers and acquisitions that offer their own particular legal needs where a general counsel with an M&A toolbox and a sense of business development can prove invaluable.

Given the transaction costs incurred by private equity funds, fund managers and portfolio companies are often meagre or have no in-house legal teams at all. Over-reliance on outside counsel can be extremely ineffective. Steve Yoost, general counsel at cloud hosting service HOSTING, argues that in-house lawyers can increase the value of private equity investments by effectively managing and mitigating risk. “You have your fiduciary duties to every private equity owner, and when you have these conflicts between investors, it can be hard to navigate,” said Lucinda Treat, general counsel of VICE Media Group, which is owned by various private equity players and private equity firms, each holding minority stakes. “I`ve always tried to look at it that way: `I`m going to see it from their perspective and understand what they want.` Then I`ll determine, “How can I bridge the gap between storytelling and advice to bring everyone together?” We believe that is beginning to change. As private equity grows — the industry managed $4.1 trillion in assets in 2020, according to Preqin, who estimated it would double to $9 trillion by 2025 — Spencer Stuart`s legal, compliance and regulatory practice has seen a growing demand for general counsel recruitment for holding companies. More and more of our private equity clients are recognising the impact that a general counsel can have on value creation and material risk mitigation in the often fast-paced, dynamic and multifaceted context of portfolio companies. The partner will also assume the role of Chief Legal Officer in 2023. KKR & Co.`s longtime general counsel, David Sorkin, saw his payroll soar to more than $20.6 million in 2021 as the investment firm announced a successful year. Sorkin KKR`s compensation was first announced in 2010, when he played a key role in the company`s IPO that year. Simpson Thacher, Sorkin`s former law firm, served as KKR`s securities advisor, along with about half a dozen other legal advisers who worked for related parties when KKR first debuted.

However, the General Counsel is not a member of the management team of many holding companies. Many portfolio firms have no general counsel at all and instead choose to use subordinate or adjacent resources or, more commonly, outsource legal work to outside lawyers.