Private equity M&A vs tech company M&A (SV) Forum

[Anonymous User]

Hi all! I'm a 5th year mid-level EC/VC lawyer in Silicon Valley. I've bounced a few firms during my career and have pretty much been focused on VC deals my whole lawyer life, with a one or two M&A deals sprinkled in each year. All of the deals that I've worked on have been private sell-side or buy-side tech company deals in various structures (APA, merger, etc.). I'm looking at opportunities with M&A-focused groups and many of them describe their work as "private-equity focused M&A" and that they look for people with an interest in private equity. I'm just curious, how do these types of deals differ from regular tech buy/sell side deals? Is private equity work super different that skill sets from tech corporate M&A may not be transferrable? How hard would the learning curve for someone like me be (someone with lots of experience in EC/VC and some limited experience in tech M&A deals)?

[CanadianWolf]

It may help if you read the thread about M&A being the most overrated practice area. (A seemingly knowledgeable poster in that thread suggests that VC activity is more lightweight than either M&A or P/E transactions.)

It would also be helpful if you shared the types of functions that you have performed during the course of your 4 or 5 years in venture capital transactions--otherwise only speculative responses can be offered.

As an aside, do you or any of your fellow practitioners do any financial modeling ?

Interesting that you refer to "private equity M&A".

[Anonymous User]

I did mainly tech deals too, but dabbled in some PE when I was a junior. The PE stuff is going to be more complicated on a number of levels:

The primary deal docs are going to be more complicated since there are different interests involved; think about the waterflow mechanics for the money going forward, for example, given the divide between management and the PE sponsors and such, as opposed to a tech firm buying another tech firm, maybe there are earnouts or milestones, but nothing as convoluted as the mechanics involved in a PE deal.

PE deals also will tend to have more entities involved in the structuring, blockers and such so that LPs don't get certain kinds of income they don't want (UBTI), etc. Again, usually more work there than Tech Co A buys Tech Co B, maybe using a merger sub.

PE deals will also have a debt component too, which is like a whole other deal going on in parallel and has to be accounted for as you do the main buyout.

So knowing the basics of M&A and doing asset purchase agreements, statutory mergers, etc., will give you some of the building blocks for doing PE deals, but won't really get you to a place where you'd be trusted to run the deal and be the primary drafter for the main deal docs in a PE deal.

[sms18]

in addition to the points noted above, PE buyside transactions are likely to involve much heavier diligence than EC tech transactions since early/growth stage tech companies probably don't really have robust corporate history (e.g., past acquisitions, reorgs, audits, lawsuits etc.), such that there isn't as much to be diligenced compared to PE deals involving more mature companies.

As above poster noted, conflicting interests among the parties involved in a transaction plus greater number of entities in the acquisition structure will complicate things further in a PE deal compared to a typical tech company deal. PE sponsors also tend to get creative with acquisition/sale structures by doing certain pre-closing/post-closing reorgs or refinancings that can add many more pages to your transaction slide deck.