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Financial Research Associates

Financial Research Associates. Effectively Administrating Private Equity Funds June 14, 2007. Your Panel. Gerry Esposito Chief Financial Officer, Newbury Partners LLC Kathleen Hayes CFO / Controller, AMCI Capital LP Robert Liptak Managing Director, Clarus Ventures Richard Morris

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Financial Research Associates

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  1. Financial Research Associates Effectively Administrating Private Equity Funds June 14, 2007

  2. Your Panel • Gerry Esposito • Chief Financial Officer, Newbury Partners LLC • Kathleen Hayes • CFO / Controller, AMCI Capital LP • Robert Liptak • Managing Director, Clarus Ventures • Richard Morris • Partner, Herrick, Feinstein LLP

  3. Fundraising • Fund Type (classic private equity v. new) • Resources • Placement Agent • Ability to add value • Costs • Overspecialization • Side Letters • Effects on Marketing • First time fund • Management Team • Infrastructure • Effects on Returns • Due Diligence Information

  4. Outsourcing / Consultants • When does it make sense? • When is it a bad choice? • Due Diligence • Account Representative turnover • Fund Expense – Firm Expense

  5. Service Provider Fees • Flat Fee Deals • Big 4, tier two firms or regional accounting or legal firms? • Broken Deal Expenses - How are they handled? • Legal and Accounting Fees • Organizational Expense Cap • Know Your Customer Rules

  6. Marketing • How to reach LPs via networking • Proper private placement memos • “Opt In” Adviser Act • Reports to LPs

  7. Information Technology Issues • Choosing external IT consultants • Building the proper network and infrastructure that provide flexibility and room for growth • Disaster recovery

  8. Patriot Act Issues • Bank relationships • Due diligence relating to LP Investors • Potential legal obligations

  9. Fact Patterns for Discussion • A fund will have an initial raise from a limited number of investors, mostly “fund of funds”. One source is willing to provide a significant amount of initial capital if it can receive a portion of the “promote” payable to the fund manager. • A fund has operated successfully during the last two years. With two years remaining for its “investment period” it wants to expand from its core investment strategy and invest in other strategies. The partnership agreement permits the general partner to expand the investment strategy but this fact was only briefly mentioned in the PPM.

  10. A fund has lost its founder and Chairman (or other key investment manager) due to: • SEC or other regulatory investigation. • Retirement. • “Split” with other investment managers to join another fund.

  11. A fund wants to outsource its accounting and other administrative functions to: • A new company without any proven track record (organized by former partners of major firms). • An affiliate of the founding member of the fund. • An “offshore” firm

  12. A fund is raising additional capital and will use projections in its PPM. The only financial information that will be provided to investors are audited financials and customary tax information.

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