Founders and principals of asset management firms often direct considerable attention to negotiating their economic arrangements, especially when their firms are successful. Many do not, however, consider what would happen if one of their co‑founders or principals voluntarily or involuntarily were to depart the firm. That can often force firms to scramble to consider those issues without the appropriate, pre-negotiated legal framework, often when the matters at stake and tension among the parties are at their peak. Lowenstein Sandler partner Eileen Overbaugh provides guidance in this two-part guest series regarding key terms principals at firms can incorporate in their respective management company and GP agreements to anticipate and mitigate those potential conflicts. This second article analyzes pressure points in negotiating restrictive covenants, departure scenarios and buy/sell arrangements for founders or principals to focus on when drafting management agreements. The first article
reviewed the unique challenges inherent in bespoke and personal business arrangements, with particular attention paid to important governance and economic considerations that can arise. See our three-part series: “Why Fund Managers Must Review Their Positions on Succession Planning and CCO Outsourcing
” (Apr. 14, 2020); “What Fund Managers Should Consider When Hiring and Onboarding CCOs; Determining CCO Governance Structures
” (Apr. 21, 2020); and “A Succession‑Planning Roadmap for Fund Managers
” (Apr. 28, 2020).