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.