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Proskauer Funds Seminar Series Under the Microscope Proskauer Funds Seminar Series 9 July 2020 Under the Microscope: Fundraising Terms and Trends Webinar Agenda • Key takeaways from our European buy-out and venture capital terms survey • An update on trends in funds finance ‒ Cameron Roper, Proskauer • A panel discussion from industry leaders on how GPs and LPs are responding to the current market disruption ‒ Tanja Lukas, Schroder Adveq ‒ Paula Langton, Campbell Lutyens ‒ Luke Finch, Hg ‒ Aranpreet Randhawa, Proskauer, Moderator 3 Housekeeping • This webinar will be in listen only mode. If you need technical assistance, please submit your request under the Tech tab in the window on the right- hand side of your computer screen • If you wish to submit a question during the session, please use the Q&A tab in the window on the right-hand side of your screen • A follow up email with a link to the slides and recording will be sent after the conclusion of today’s webinar • Upcoming webinar - The Bottom Line: Considerations for Portfolio Companies Navigating Distress | 15 July 2020 4 Key Takeaways from our European Fund Terms Survey Presented by Ed Lee 5 Key takeaways from our analysis of terms from recent buy-out and venture fundraisings European Buyout Funds • Jurisdiction • Term • Investment Period • Recycling European Venture Capital Funds • Jurisdiction • GP Commitment • Recycling • Distribution Waterfall 6 European Buyout Funds 7 Methodology Funds Reviewed 50 100 200 400 800 1,600 3,200 6,400 12,800 25,600 8 Fund Size (Million Euros) Jurisdiction of formation ALL FUNDS Sweden Spain Netherlands Luxembourg Jersey Guernsey Germany Jurisdiction France England Delaware Cayman Islands 0 2 4 6 8 10 12 14 16 9 Number of Funds Reviewed Initial term ALL FUNDS 2% 2% 1% 3% 15 Years 13 Years 12 Years 11 Years 10 Years 92% 10 Approval required for extension of term ALL FUNDS 3% GP Discretion 15% 16% GP Discretion, then LP Vote GP Discretion, then LPAC Approval LP Vote LPAC Approval LPAC Approval, then LP Vote 23% 20% 23% 11 Approval required for extension of term ≤€500M 6% GP Discretion GP Discretion, then LP Vote 23% 12% GP Discretion, then LPAC Approval LP Vote LPAC Approval LPAC Approval, then LP Vote 18% 29% 12% 12 Approval required for extension of term >€500M- 1.5B 5% 10% GP Discretion GP Discretion, then LP Vote GP Discretion, then LPAC Approval 15% 25% LP Vote LPAC Approval LPAC Approval, then LP Vote 20% 25% 13 Approval required for extension of term >€1.5B- €3.75B GP Discretion 15% 16% GP Discretion, then LP Vote GP Discretion, then LPAC Approval LP Vote LPAC Approval LPAC Approval, then LP Vote 23% 31% 15% 14 Approval required for extension of term >3.75B 13% 12% GP Discretion GP Discretion, then LP Vote GP Discretion, then LPAC Approval LP Vote 12% LPAC Approval 19% LPAC Approval, then LP Vote 44% 15 Investment period ALL FUNDS 6% 6 Years 5 Years 4 Years 32% 62% 16 Investment period ≤€500M 6% 6 Years 5 Years 4 Years 94% 17 Investment period >€500M-1.5B 10% 6 Years 5 Years 30% 4 Years 60% 18 Investment period >€1.5B-€3.75B 8% 6 Years 5 Years 4 Years 46% 46% 19 Investment period >3.75B 6 Years 5 Years 4 Years 44% 56% 20 Recycling ALL FUNDS Broad Rights to Recycle During Investment Period Limited Specific Rights to Recycle 41% 59% 21 European Venture Capital Funds 22 Methodology Funds Reviewed - 200 400 600 800 1,000 1,200 * Two funds do not state a target or a hard cap fund size. 23 Fund Size (Million Euros) Jurisdiction of formation Netherlands Luxembourg Jersey Guernsey Germany Jurisdiction France England Delaware Cayman Islands 0 1 2 3 4 5 6 7 24 Number of Funds Reviewed GP commitment (% of commitments) 15% 10% 8% 5% Jurisdiction 3% 2% 1% 0 2 4 6 8 10 12 25 Number of Funds Reviewed Recycling Broad Rights to Recycle During Investment Period Limited Specific Rights to Recycle 34% 66% 26 Distribution waterfall – Type of waterfall 6% American (Deal-by-Deal) European (Whole Fund) 94% 27 Distribution waterfall – Preferred return (%) 14% 1.25X Funded Commitment 120% of Contributions 27% 4% 25% of Commitments 3% 20% of Commitments 10% of Commitments 8% Compounded Annually 10% 7% Compounded Annually 6% Compounded Annually 3% 5% Compounded Annually 3% No Preferred Return 23% 10% 3% 28 Distribution waterfall – Carried interest percentage 30% 18% 25% 20% 35% Carry Ratchet – 20%, increased to 25% 3% Carry Ratchet – 20%, increased to 25%, increased to 30% Carry Ratchet – 20%, increased to 30% 23% 12% 9% 29 Looking Ahead: The Next 18 Months 30 Looking ahead: the next 18 months • ESG • Recycling • Bridge facility transparency • Return of ‘Speed bumps’ 31 Fund Finance Update Presented by Cameron Roper 32 Overview of the fund finance market and the impact of COVID-19 • Is the crisis arising from COVID-19 comparable to the 2008 financial crisis? • Are banks still lending in the fund finance space? • Are funding requests under uncommitted lines being honored? 33 Subscription facilities • Are subscription facilities terms changing because of COVID-19? • Do we expect to see borrowing base reductions as a result of investor defaults or rating changes? • New ILPA guidelines on disclosure of subscription lines 34 NAV / asset-backed facilities • What is the outlook for NAV facilities as a result of COVID-19? • Are we seeing defaults or do we expect defaults as part of June reporting? • Amendments to LPAs may be needed to permit new NAV facilities • Preferred equity may be an option to consider 35 Industry Panel Luke Finch Paula Langton Hg Capital Campbell Lutyens Tanja Lukas Aranpreet Randhawa Schroder Adveq Proskauer How GPs and LPs are responding to the current market disruption 36 The information provided in this slide presentation is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the firm, our lawyers or our clients. No client-lawyer relationship between you and the firm is or may be created by your access to or use of this presentation or any information contained on them. Rather, the content is intended as a general overview of the subject matter covered. Proskauer Rose LLP (Proskauer) is not obligated to provide updates on the information presented herein. Those viewing this presentation are encouraged to seek direct counsel on legal questions. © Proskauer Rose LLP. All Rights Reserved..
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