Market uncertainty and fears of a global recession sparked by the current outbreak of the coronavirus are likely to have a significant impact on deal flow and returns for at least some PE sponsors, even if only in the short term. Many portfolio companies are facing significant shortfalls in revenue, which may cause sponsors to, among other things, strategically seek cash inflows for their portfolio companies, delay exiting investments due to abrupt reductions in asset valuations and reassess their investment strategies. In light of the pandemic’s expected effect, it may prove helpful for government pension plans, funds of funds, family offices and other institutional investors to revisit the terms of their fund agreements. Investors may need to modify previously acceptable terms to secure greater control over, or give sponsors more flexibility to handle, a fund’s operations during the global pandemic or similar catastrophic event. In a guest article, Sullivan & Worcester attorneys Arinze N. Onugha, Nicole L. Rives and Susan M. Barnard outline certain typical fund terms investors may wish to revisit as they monitor and invest in PE funds. See “Key Considerations for Private Fund Investors Navigating the Coronavirus Crisis
” (May 12, 2020); and “Withstanding the Coronavirus Pandemic: Key Person Clauses, Fundraising Disruptions and Deal Flow Issues (Part Two of Three)
” (Mar. 31, 2020).