Current Scope of PE‑Specific Side Letter Provisions: Co‑Investment Rights, LP Advisory Committee Seats and Parallel Funds/AIVs (Part Two of Three)

One of the most complicated tasks for private equity (PE) managers when launching new funds is the negotiation of side letters with prospective limited partners (LPs). This problem has grown each year and will continue to worsen as LPs become more active and sophisticated in vetting and managing their investments. Managers must thus understand the market for side letter provisions. This second article in our three-part series on PE‑specific side letter provisions details trends in negotiating co‑investment rights and LP advisory committees, as well as investor resistance to being moved into alternative investment vehicles and parallel funds. The first article discussed general trends in PE side letters, along with excusal rights and placement agent representations. The third article will explore overcall limitations, key person provisions and most favored nation clauses. For more on side letters, see coverage of a Seward & Kissel webinar: “Key Side Letter Terms” (Nov. 16, 2017); and “Side Letter Trends” (Nov. 30, 2017). See also “Study Finds Reduced Fees and MFN Clauses Remain Most Prevalent Side Letter Terms” (Oct. 5, 2017).

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