Yearly Archives: 2014

2013 Private Equity Year in Review

Posted by Andrew J. Nussbaum, Wachtell, Lipton, Rosen & Katz, on
Monday, January 6, 2014
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Andrew J. Nussbaum is a partner in the corporate department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton firm memorandum by Mr. Nussbaum, Steven A. Cohen, Amanda N. Persaud, and Joshua A. Feltman.

Private equity deal activity ebbed and flowed, often unexpectedly, in 2013. Despite some slow periods, strong debt and equity markets helped support first nine-months numbers that are well ahead of 2012, although Q4 2013 is unlikely to match Q4 2012, where activity was stimulated by anticipated changes in the tax laws. Successful sponsors again demonstrated their ability to perceive and exploit changing market conditions. Moreover, the private equity industry posted its best fundraising numbers in years. It was a year that showed that Semper Paratus may indeed be the industry’s new motto.

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SIFIs and States

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Sunday, January 5, 2014
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The following post comes to us from Jay Lawrence Westbrook, Benno C. Schmidt Chair of Business Law at The University of Texas School of Law.

Today an enormous global civilization rests upon a jury-rigged financial frame rife with moral hazards, perverse incentives, and unintended consequences. This article, SIFIs and States, forthcoming in the Texas International Law Journal, addresses one aspect of that fragile structure. It argues for basic reform in the international management of financial institutions in distress, with a special emphasis on SIFIs (Systemically Important Financial Institutions). The goal is to examine public institutional arrangements for resolution of financial institutions in the midst of a crisis, rather than the substantive rules governing the resolution process. The proposition central to this article is that the resolution of major financial institutions in serious distress will generally require substantial infusions of public money, at least temporarily. The home jurisdiction for a given financial institution must furnish the bulk of the public funds necessary for the successful resolution of its financial distress. The positive effect is that other jurisdictions may be likely to acquiesce in the leadership of the funding jurisdiction in exchange for acceptance of that financial responsibility. On the other hand, acceptance of the funding obligation would have profound consequences for the state as well as the institution, because the default of a SIFI may threaten the financial stability of that state. Until the crisis of 2007-2008, all that was implicit and unexamined in the political process; to a large extent it remains so.

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Promoting Investor Protection in Small Business Capital Formation

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on
Saturday, January 4, 2014
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Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at a recent open meeting of the SEC; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [Dec. 18, 2013], the Commission proposes rules to implement Title IV of the JOBS Act. As mandated by that Act, the proposed rule would allow companies to issue a class of securities that are exempted from the registration and prospectus requirements of the Securities Act, provided that certain conditions are met. This is the third major rulemaking undertaken by the Commission to comply with the JOBS Act since its adoption last year.

Enhancements to Investor Protection under Regulation A-plus

The proposed rules being considered today enhance an existing exemptive regime known as Regulation A. Under the current provisions of Regulation A, companies can raise up to $5 million per year without registration, provided that they file an offering statement with the Commission containing certain required information and furnish an offering circular to purchasers, among other conditions.

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Fed Outlines Proposals to Limit Short-Term Wholesale Funding Risks

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Friday, January 3, 2014
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The following post comes to us from Derek M. Bush, partner at Cleary Gottlieb Steen & Hamilton LLP, and is based on a Cleary Gottlieb memorandum by Mr. Bush, Katherine Carroll, Hugh C. Conroy, Jr., Allison H. Breault, and Patrick Fuller.

On November 22, 2013, Federal Reserve Board Governor Daniel Tarullo delivered a speech at the Americans for Financial Reform and Economic Policy Institute outlining a potential regulatory initiative to limit short-term wholesale funding risks. [1] This proposal could increase capital requirements for and apply additional prudential standards to firms dependent on short-term funding, with a focus on securities financing transactions (“SFTs”)—repos, reverse repos, securities borrowing/lending and securities margin lending.

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Delaware vs. New York Governing Law

Posted by Daniel Wolf, Kirkland & Ellis, on
Thursday, January 2, 2014
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Daniel Wolf is a partner at Kirkland & Ellis focusing on mergers and acquisitions. The following post is based on a Kirkland memorandum by Mr. Wolf and Matthew Solum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Among the many legalese-heavy paragraphs appearing under the “Miscellaneous” heading at the back of transaction agreements is a section that stipulates the laws of the state that will govern the purchase agreement as well as disputes relating to the deal. Often, it is coupled with a section that dictates which courts have jurisdiction over these disputes. While the state of incorporation or headquarters of one or both parties is sometimes selected, anecdotal as well as empirical evidence suggests that a healthy majority of larger transactions choose Delaware or New York law. Reasons cited include the significant number of companies incorporated in Delaware, the well-developed and therefore more predictable legal framework in these jurisdictions, the sophistication of the judiciary in these states, the perception of these being “neutral” jurisdictions in cases where each party might otherwise favor a “home” state, and the desired alignment with the governing law of related financing documents (usually New York).

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