Strategic Cooperations Between Private Equity Sponsors and Corporate Investors: Key Structuring Considerations and Deal Terms for JV Arrangements
March 18, 2022 | BY
Susan MokGeoffrey Chan and Xuan Zhang of Skadden, Arps, Slate, Meagher & Flom highlight some key factors to consider when setting up a joint venture cooperation including structuring considerations, structuring options and deal terms
Summary
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- To ensure the alignment of a PE sponsor's financial objectives over a fixed period with a strategic investor's long term objectives, the structure and key terms of such cooperation should be carefully planned.
- Careful planning of the JV's governance structure and its control over portfolio companies is required.
- In addition to the structuring considerations and legal forms there are several commercial and legal terms that the parties will want to carefully consider.
Private equity (PE) sponsors have increasingly been entering into joint venture (JV) arrangements with strategic investors by offering a customized alternative to traditional PE funds.
Such JV cooperation is gaining popularity because it provides unique opportunities to PE sponsors and strategic investors. The arrangement allows for customized structuring and economic terms, as well as other tailor-made terms based on a strategic investor's special needs. A PE sponsor, in turn, gains access to capital, attractive industry expertise and synergies, and potential exit solutions for portfolio companies.
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