Letter from the Editors

The increasing interest rates of the past year and a half have placed constraints on accessing the traditional sources of capital that are private equity’s lifeblood. The Fall 2023 Private Equity Report explores strategies that are available to sponsors and companies in need of capital. We also examine the evergreen topic of how to prepare for the sale of a portfolio company, as well as a matter of growing importance: AI governance.

• Asset Management M&A: Current Trends and Key Legal Considerations

  Attracted by greater access to capital, private equity firms continue to play a role in the ongoing consolidation taking place in the Asset Management industry. We explore a range of structuring and legal considerations in these deals, including valuation and consideration, consent by clients and limited partners, regulatory approvals, and post-closing commercial arrangements and business integration.

• Ready, Set, Sell: 10 Things to Consider Before Starting a Sale Process

  In a follow-up to our detailed examination of carve out transactions in the Spring 2023 Private Equity Report, we outline ten things sponsors need to do in order to execute a successful portfolio company sale.

• What Real Estate Equity Investors Considering Debt Investing Need to Know

  The rise in interest rates and the macro environment have pushed many fundamentally sound real estate properties toward distress—a development that has some real estate investors who typically take equity positions eyeing becoming lenders as well. Equity investors considering such a move should not let their familiarity with the sector obscure the fact that the lender role brings different market relationships, rights and responsibilities.

• Capital Structure Options for a Higher Interest Rate Environment

  Both private equity firms and their portfolio companies are adapting to the end of the era of inexpensive and readily available debt financing. In this new reality, companies in need of financing can employ various techniques to optimize their capital structure, including liability management transactions and different types of financial instruments.

• NAV Loans for Buyout Funds: A Newly Popular Tool in Fund Finance

  As fund sponsors face both heightened liquidity needs and a slowdown in exits, net asset value (NAV) financing has become increasingly common. Establishing these credit facilities requires extensive diligence by lenders at both the upper-tier and portfolio company level and requires sponsors and lenders to come to terms on numerous issues that are explored in this article.

• Giving AI Governance a Risk-Based Approach

  With the advent of generative AI, private equity firms are grappling with the twin tasks of encouraging and supporting portfolio companies’ use of this potentially transformative technology while also ensuring that AI initiatives are approached in a responsible, defensible, and controlled manner. Establishing a risk-based AI governance program is a critical step in doing so.