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Private Equity, Venture Capital and LBOs

Synopsis This course is divided into 3 main parts: first, a discussion of the life cycle of a leveraged buyout; second, the tax issues that arise, especially now as a result of the credit crunch; and finally, the various possible capital structures associated with such deals and their advantages and disadvantages. The course is concluded with a brief discussion of pending legislation dealing with private equity.

Outline

I. Introduction
II. Life Cycle of an LBO
        A. Life Cycle of a Leveraged Buyout
        B. § 338 Election
        C. Withdrawal of Cash
        D. Initial Public Offering
III. Tax Issues
        A. Restructurings/Workouts
        B. Restructurings/Workouts (continued)
        C. Restructurings/Workouts (more)
        D. Restructurings/Workouts (concluded)
IV. Capital Structure
        A. Capital Structure
        B. Subordinated Debt
        C. Subordinated Debt (continued)
        D. Preferred Stock
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The Penn State Dickinson School of Law

Founded in 1834 by Judge John Reed, The Dickinson School of Law is the oldest law school in Pennsylvania and the fifth oldest in the nation. Throughout its history, the law school has trained distinguished graduates who have gone on to become leaders of the bar, of the judiciary, of government, and of business. These alumni include the first secretary of the U.S. Department of Homeland Security, five governors, three U.S. senators, and more than 100 federal, state and county judges and countless prominent lawyers and civic leaders. In 2000, the law school merged with Penn State, one of the country’s premier research universities, and stepped into a new era of legal excellence.

Penn State Dickinson School of Law Center for the Study of Mergers and Acquisitions

The center, headed by Samuel C. Thompson Jr., former director of the UCLA Center for the Study of Mergers and Acquisitions, examines corporate, securities, tax, antitrust, and other legal and economic issues that arise in mergers and acquisitions. An important part of the center’s mission is to sponsor continuing legal education programs addressing these issues.

The Association of the Bar of the City of New York

The years following the Civil War were tumultuous ones for New York City, offering many opportunities to the dishonest. Unsavory politicians and errant members of the bench and bar were among those who took advantage of those troubled times. In December 1869, a letter was circulated among some of the city’s lawyers addressing those improprieties. It called for the creation of a new bar association to “sustain the profession in its proper position in the community, and thereby enable it ... to promote the interests of the public ....” More than 200 lawyers responded by signing a declaration of organization and in 1870 The Association of the Bar of the City of New York was born. The young organization quickly made its presence felt. Among its first activities was a campaign to defeat corrupt politicians and judges at the polls and to establish standards of conduct for those in the legal profession.

The association continues to work at political, legal and social reform, and maintaining high ethical standards for the legal profession. The association also continues to implement innovative means by which the disadvantaged may be helped. Much of this work is accomplished through the Association's more than 160 committees, each charged to consider a specific area of law or the profession.

The association has grown to more than 23,000 members. To serve them, the association strives to move ahead in many areas. The library is the largest member-funded law library in the country, and provides members with a “gateway” to online services, including free use of LexisNexis and WestLaw, while continuing to provide more traditional library services. The Small Law Firm Center, Career Management Program and other benefits are constantly evolving to serve members’ needs. More than 150 continuing legal education programs are presented annually.

The public good remains one of the association’s highest priorities. The Legal Referral Service, jointly sponsored by the association and the New York County Lawyers’ Association, provides an array of services directly aimed at serving the needs of the public. The City Bar Justice Center identifies the most pressing legal concerns of New York’s neediest and uses novel approaches to address them, often involving community participation.

 



Speakers / Authors:

Photo of Deborah L. Paul

Deborah Paul
Wachtell, Lipton, Rosen & Katz

Deborah L. Paul is a partner in the New York office of Wachtell, Lipton, Rosen & Katz. She focuses focuses on the tax aspects of corporate transactions, including mergers and acquisitions, joint ventures, spinoffs and financial instruments. Ms. Paul has been the principal tax lawyer on numerous domestic and cross-border transactions, including strategic acquisitions and private equity buyouts, in a wide array of industries, including telecommunications, oil and gas, food, defense and energy. She was elected partner in 2000.

Ms. Paul is an active member of the Executive Committee of the Tax Section of the New York State Bar Association. Prior to joining the Firm in 1997, Ms. Paul was an assistant professor at the Benjamin N. Cardozo School of Law (1995-1997) and an acting assistant professor at New York University School of Law (1994-1995). She clerked for Chancellor William T. Allen of the Court of Chancery of the State of Delaware (1989-1990).

Ms. Paul received an A.B. from Harvard University in 1986, a J.D. from Harvard Law School in 1989 and an LL.M. in taxation from New York University School of Law in 1994.

Photo of John J. Creed

John Creed
Simpson Thacher & Bartlett LLP

John J. Creed is a partner at Simpson Thacher & Bartlett LLP, where he is a member of the firm’s Tax Department. Mr. Creed’s practice includes advising on private equity funds, hedge funds, mergers and acquisitions (including tax-free spin-offs), cross-border tax matters, partnerships, joint ventures, securitizations and financing transactions.

The clients Mr. Creed has advised in private equity and fund transactions have included Blackstone, Cypress, Evercore, Lehman Brothers, The Carlyle Group, Quadrangle, JC Flowers and many others. Mr. Creed has advised private equity funds, investment banks and corporations in the structuring of various acquisitions, financings, financial instruments and restructurings. He has also advised non-U.S. corporations in structuring acquisitions and operations in the United States and non-U.S. issuers in raising capital in the United States. Mr. Creed has worked on numerous domestic and international joint venture transactions including investment in Asia, Latin America, South Africa, Europe and Japan.

Mr. Creed became a partner at Simpson Thacher in 1996. He graduated with High Honors in 1985 from Trinity College Dublin School of Law and received his L.L.M. in taxation from New York University School of Law in 1988.

Mr. Creed is a member of the Association of the Bar of the City of New York. He was admitted to the New York State Bar in 1986. He is also admitted to practice before the U.S. Court of Appeals for the Eighth Circuit.

Photo of Patrick C. Gallagher

Patrick Gallagher
Kirkland & Ellis LLP

Patrick C. Gallagher is a partner in the New York office of Kirkland & Ellis LLP. He handles structuring and tax aspects of complex domestic and cross-border transactions for private equity and other clients, including acquisitions and divestitures, fund formation, public offerings and other financings, and restructurings.

Mr. Gallagher has been named as a leading tax attorney in both Chambers USA, America's Leading Lawyers for Business (annually since 2005), which describes him as "someone who solves problems," has a "wonderful presence," "[pays] scrupulous attention to all the details," and is an "astute attorney;" and Who's Who Legal: Corporate Tax (annually since 2003).

In 1974, Mr. Gallagher graduated from Pomona College with a B.A. He earned his M.A. from the University of Chicago in 1977 and his J.D., cum laude from Harvard Law School in 1985. He is admitted to practice in Illinois and New York.

Photo of William D. Alexander

William Alexander
Internal Revenue Service

William D. Alexander is the Associate Chief Counsel (Corporate) at the Internal Revenue Service. He has been with the IRS Office of Chief Counsel (Corporate) since 1990. Prior to joining the IRS, he was associated with Simpson Thacher & Bartlett in New York. He has a bachelor’s degree from Cornell University, a law degree from Columbia Law School, and an LL.M. in taxation from New York University School of Law.