LL4CQE Half Unit
Legal Aspects of Private Equity and Venture Capital
This information is for the 2021/22 session.
Prof Sarah Paterson New Academic Building 6.19 and Dr Simon Witney N/A
This module is co-taught by Simon Witney, Visiting Professor in Practice and a practicing lawyer, and Sarah Paterson, Associate Professor of Law. Simon teaches Sessions 1-8 and Sarah teaches Sessions 9 and 10.
This course is available on the Executive LLM. This course is not available as an outside option.
Students should note that private equity is a specialist asset class,and the basics of debt and equity are not covered in LL4CQE. The course is, therefore, recommended for students who are taking other, relevant corporate law and financial law courses, or who have relevant experience.
This module will equip students with a detailed understanding of the legal structures and issues arising in international private equity and venture capital. It is founded on deep academic analysis of pertinent theoretical and legal issues complemented by insights from relevant practitioners. It has a UK focus but includes relevant aspects of European Union law with comparative global perspectives.
The module will cover:
• Private equity and venture capital fund raising and fund structuring, including the usual terms of private equity funds.
• The European regulatory framework.
• The structure and terms of venture capital investments and buyouts.
• The corporate governance of private equity-backed companies.
• The debt financing arrangements usually encountered on an LBO.
Session 1: Introduction to private equity and venture capital and some basic theory
This Session will introduce the legal structures and commercial dynamics of private equity and venture capital and the theoretical frameworks that will underpin the course.
Session 2: Fund terms
In Session 2 we examine the core economic and non-economic terms of a typical private equity or venture capital fund. We consider the theoretical basis for these terms.
Session 3: Fund structures: the limited partnership
In this Session we look at the limited partnership structure, examine why it is used and its main legal and tax characteristics. We also look at other aspects of the typical private equity fund structure.
Session 4: Private equity fund (and manager) regulation
This Session looks at UK and EU regulatory initiatives, and critically evaluates the provisions of the Alternative Investment Fund Managers Directive which affect private equity funds.
Session 5: Venture capital investments
Starting from a theoretical perspective, we will analyse the terms of a typical venture capital investment into a portfolio company by reference to example documents. We will also examine various aspects of contract and company law which have particular relevance to VC structures.
Session 6: Negotiating the VC deal: case study
In this Session, we will discuss the key points arising from a venture capital investment case study. We will focus on key points which have a legal as well as a commercial aspect, and connect these to the theoretical discussions in Session 5.
Session 7: The buyout: structure and terms
This Session will examine the structure of a buyout and how it differs from a VC investment. We will focus on pertinent company law rules and the main commercial terms.
Session 8: The buyout: corporate governance issues
This Session will examine the ways in which private equity firms approach corporate governance. We will consider this in the context of the UK legal framework and some recent developments in corporate governance regulation that apply to large, private companies.
Session 9: LBO debt financing
This Session will examine the financing of the LBO. We will examine the relationship between the theory and practice of private equity as an asset class and certain key terms of the LBO financing agreements. We will also examine what finance theory tells us to expect about the terms of the financing agreements, and how we might explain the rise of covenant lite and covenant loose terms.
Session 10: Document review
In this Session we will apply the theory which we have studied in Sessions 8, 9 and 10 to the legal documentation used in an LBO.
Students will receive approximately 30 hours of contact time.
Students will have the option of producing a formative essay of 2000 words to be delivered one month from the end of the module’s teaching session by email.
• Gilligan, J. and Wright, M., Private equity demystified: An explanatory guide, ICAEW, 2014 (freely available at https://www.icaew.com/technical/corporate-finance/financing-change/private-equity-demystified-an-explanatory-guide-160216).
• Hale, C. (ed.), Private Equity: A Transactional Analysis, 4th edition (Globe Law and Business, 2020).
• Witney, S., The corporate governance of private equity-backed companies, 2017, PhD thesis (freely available at: http://etheses.lse.ac.uk/3557/).
Further readings wil be posted on Moodle.
Assessment path 1
Essay (100%, 8000 words).
Assessment path 2
Take-home assessment (100%).
Course selection videos
Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.
Important information in response to COVID-19
Please note that during 2021/22 academic year some variation to teaching and learning activities may be required to respond to changes in public health advice and/or to account for the differing needs of students in attendance on campus and those who might be studying online. For example, this may involve changes to the mode of teaching delivery and/or the format or weighting of assessments. Changes will only be made if required and students will be notified about any changes to teaching or assessment plans at the earliest opportunity.
Total students 2020/21: Unavailable
Average class size 2020/21: Unavailable
Controlled access 2020/21: No
Value: Half Unit
Personal development skills
- Team working
- Problem solving
- Application of numeracy skills
- Commercial awareness
- Specialist skills