GP-led secondary deals: to diligence or not to diligence?
Reuters has published “GP-led secondary deals: to diligence or not to diligence?,” written by Akin Gump investment management partner Fadi Samman and senior counsel Krishna Skandakumar and corporate partner Timothy Clark.
The article discusses the limited legal due diligence approach in general partner (GP)-led secondary transactions taken by some lead buyers, new money investors or the general partner in these deals. The authors note that, unlike PE M&A due diligence, the limited due diligence approach “generally excludes the gambit of financial, tax, operational and transactional level due diligence, including labor and employment practices, environmental, real estate, material contracts, employee compensation and benefits, customers and suppliers, intellectual property, and other operational level matters.”
The authors examine critically the “alignment theory” used to justify this limited due diligence approach, discuss critical focus areas for new money investors in cases of alignment, and review other issues requiring closer scrutiny when the GP may have less incentive to conduct appropriately rigorous due diligence.
To read the full article, click here.
