Four Distinct Ways to Structure Minority Stake Investments

Minority stake investments continue to be used by a range of alternative investment managers for various reasons. The different characteristics and objectives of sellers call for different types of transactions to meet their needs – e.g., PE sponsors and other managers with long-term capital streams are best suited to minority stake investors. In other instances, the nature of the investing entity can dictate a preferred approach – e.g., sovereign wealth funds and insurance companies are well-suited to participate in seed-and-stake transactions. To discuss the four primary transaction types for minority stake investments, Morgan Lewis recently hosted a program featuring partner Robert D. Goldbaum and of counsel Joanna Maria El Khoury. The panel also addressed specific considerations investors should weigh in each type of transaction; liquidity and other rights typically afforded to investors; and specific issues and considerations for minority stake transactions in the Middle East. This article summarizes the panelists’ insights and key takeaways. For insights from other Morgan Lewis attorneys, see “Trends in Private Fund Terms and GP–LP Fundraising Perspectives in the Current Market Environment” (Jul. 27, 2023); and “Prevalence of ESG Strategies Among Shari’a‑Compliant Funds and Attendant Issues” (Nov. 1, 2022).

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