The Merits and Shortcomings of the Diligence‑Lite Approach to GP‑Led Transactions
Private Equity Law Report has published “The Merits and Shortcomings of the Diligence‑Lite Approach to GP‑Led Transactions,” written by Akin Gump investment management partner Fadi Samman and senior counsel Krishna Skandakumar and corporate partner Timothy Clark.
The article begins by describing GP-led secondary transactions as involving “a GP selling assets from one of its managed vehicles to another newly formed managed vehicle. Although a purchase and sale agreement governs the asset sale (which may include equity interests in wholly or partially owned portfolio companies), the GP acts on both sides of the transaction – unlike in traditional, change-of-control M&A deals.”
The authors write that, as a result of that difference, unless new-money investors elect to undertake in-depth due diligence, and in contrast to the process in a traditional M&A deal, the nominal buyer in a GP-led transaction does not, usually, undertake detailed due diligence.
The article explores the streamlined, “diligence-lite” process undertaken by new-money investors in GP‑led secondary transactions, examining “the rationale behind the diligence-lite process and what it entails; offers recommendations for when more detailed, asset-level due diligence may add value for new-money investors; forecasts trends in the use of the diligence-lite approach in GP‑led transactions; and anticipates the likelihood of ongoing, widespread adoption.”
To read the full article, click here.
