The Private Equity Contract
THE OXFORD HANDBOOK OF PRIVATE EQUITY, D. Cumming, ed., Oxford University Press, March 2012
25 Pages Posted: 30 Mar 2012 Last revised: 3 Oct 2012
Date Written: December 10, 2011
This chapter examines private equity's unique contracting arrangements for the acquisition of public targets. The shifting terms and structure of the private equity contract are explored, including revisions made in light of the exogenous shock of the financial crisis. Private equity's standard contractual arrangements provide optionality to abandon agreed acquisitions expanding the universe of potential acquisition targets. I argue that the success of private equity is in part due to these unique transactional arrangements.
Keywords: private equity, contracts, complex contracts, contractual design
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