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This episode features a panel discussion on how evolving regulations, shifting market dynamics, and operational challenges are reshaping the health care private equity landscape. Panelists express cautious optimism for increased deal activity in the latter half of 2025, while acknowledging ongoing regulatory and market uncertainties. The discussion was moderated by Chris Sheaffer, global vice-chair of Reed Smith’s Private Equity Group. Panelists included Charles Simon, director at Stifel; Brandon Cohen, principal at H.I.G. Capital; Adam Boorstein, vice president at InTandem Capital Partners; and Nicole Aiken-Shaban, partner with Reed Smith’s Health Care and Life Sciences Groups. ----more---- Transcript: Intro: Hello and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content, please contact our speakers.  Chris: Just to kick things off, my name is Chris Sheaffer. I’m vice chair of Reed Smith’s private equity globally. We’re going to do a quick 30-minute panel talking about, you know, the changes that have happened over the last six months in particular has definitely been an interesting year. We've had new regulation, deregulation, up markets, down markets, tariffs, changing policies seemingly, if not every other week, kind of daily. So we wanted to pull together, you know, some of the team to just talk about what they're seeing, how those changes have impacted valuation, how things have impacted deal flow more broadly. So with that, maybe I'll just ask each of the panelists to do a short introduction of themselves, and then we'll go forward.  Nicole: I can start. Nicole Aiken-Shaban, I'm a partner with Reed Smith in our Philadelphia office. I'm a healthcare regulatory and transactional lawyer in our LSHI group doing a lot of private equity work.  Charles: Hi, Charles Simon. I'm a director at Stifel's New York office, focused on healthcare, services, and technology M&A across providers, pharma services, health tech, and then also have a focus area in dental and vet.  Adam: I am Adam Boorstein. I'm a vice president at InTandem Capital. And InTandem is a healthcare-only sponsor, 5 to 30 million of EBITDA, frequently first institutional capital in. And we invest pretty evenly across provider, payer and tech, and outsourced pharma services. Brandon: And then Brandon Cohen, I'm a principal in Miami at HIG Capital, and we're LBO fund.  Chris: So I know when we did this last year, and obviously we stay in touch with the markets pretty closely, you know, last year we talked about, you know, new administration, less regulation around banking, more stable private credit markets, best deal year ever, 2025. 25. I know I am quoted in quite a few periodicals that have not aged well for me in terms of my predictions of the market. But maybe, Charles, let's start with you. How's the year been for you guys so far?  Charles: With that good setup. Not what was expected. Our saving grace, just in our particular team, is that we always have a mixture of founders and private equity. We had a lot of deals in a private equity pipeline that all just sort of said like for obvious reasons like now is not the time so we just keep the dialogue open. On the founder side, those are still active and I would say the general theme if you were to ask why would somebody come to market now? It's generally people who need capital so founders who are retiring, somebody who has built a business, bootstrapped it from the ground up and don't have additional capital to continue growing they're looking for either majority or minority partner, somebody who needs to do a cap table cleanup, somebody who's in a minority position needs to exit or someone who is previously in a growth mode and has now cleaned up their company but really just needs to find somebody who will be a long-term partner.  Adam: I would agree with much of what you said. For us, you can really split the world into two pieces. Within our existing portfolio companies, we do continue to see a large volume of add-on work. And most of that is founder-owned, relatively small. And coming to market for each of the reasons you just described, mostly either retirement or trying to continue to grow within a larger platform. So we've been active across the portfolio in adding on business. On the new deal front, it has been, I think, slower than expected. We were very busy at the end of last year, and there was the promise of a whole series of new potential sponsor trades coming in the early part of this year. Some have materialized, others have been pushed. But I think broadly, we still see very competitive processes for a handful of really good assets and many assets below the really good range that come out to a process and may not transact and are still sitting on the sidelines to look for a relaunch at some point, either later this year or into next year.  Chris: Brandon, how are you guys looking at stuff?  Brandon: Yeah, I would echo that sentiment. I mean, we had a pretty busy Q4. I think there were, in my fund alone, three deals that closed in the last couple weeks in December. Not necessarily all healthcare, but just more broadly. I think, you know, to Charles's point, you have to be kind of a little bit more creative, a little bit more scrappy. You know, corporate carve-outs, two of those were corporate carve-outs. I think, you know, the founder-owned deals, and then exactly at Adam's point, feels like there's kind of the haves and have-nots, where you have the A-plus assets where the market still remains hot. We've seen that on both the buy side and sell side. And then there's kind of the long tail of everything else. And I'd say many of those deals don't seem to be getting done.  Chris: I mean, Charles, just you talked about, obviously there's certain, especially founder businesses, there are certain factors that are going to drive exit as compared to a sponsor-to-sponsor deal. I mean, are you seeing the sponsors push timelines? Like maybe they were going to launch earlier this year back to the back end or, you know, looking to start to come to market sooner rather than later.  Charles: I’d say a lot of folks didn't have a hard timeline that they're necessarily pushing back. They sort of had a soft timeline knowing that the market was going to be questionable and if it's good they'll go. So it's less of that you know we told everybody we told our LPs this is when we're going to exit and more around watching the market. What I think a lot of people are doing are add-ons that's a key component right now. Then a lot of folks are just doing internal repair work so, you know really I should be putting in a CEO is going to be able to take it to either through a deal or for the next owner. A lot of folks who, in a hot M&A market, will just focus on M&A. And integration is sort of, they hope to get paid on it on the exit. Now you're seeing a lot of folks spending time on internal work. Integration is a key one. Supplier integration, IT systems.  Chris: Have you guys, I mean, last year, there was a lot of pressure from LPs to transact. This year, I feel like for at least a little while, LPs backed off a little bit because they weren't sure just literally day to day how the market was going to change. Is that a correct assumption that you guys haven't seen as much pressure to return capital or is that starting to ramp back up a little bit?  Adam: I’ll speak for myself, but we do continue to see, I think, a broad trend across the LP base that returning capital continues to be very important. However, what Charles started with, longer prep time in order to come to market really prepared for your A assets is being understood by our LPs to make sure that our shot on goal is the right one, rather than having a stop and a start. But there is certainly, I think, still pressure amongst the LP bases, both our own and new LPs that we might talk to, to really begin to return capital at a faster clip than what has been over the last several years.  Brandon: Yeah, I would just add, I mean, there's clearly pressure. I don't think it's insurmountable. I think one of the challenges from a deal flow standpoint is on the financing side. I don't think there's a pressure that people thought may come from lenders, just given how much dry powder there is out there. When you talk to lenders, it's kind of like, hey, new deal flow is slow. I'm working on a ton of restructurings where I can kind of buy out somebody who's a little bit tired. And so I don't think you have the lenders kind of holding the gun to folks and saying, hey, you're at year five, sell now. They're kind of, let's figure out how to be a little bit more creative, at least from what I've seen in the market.  Adam: I would agree with that. We have looked at creative solutions and extended credit facilities that were coming up for maturity, I think primarily because those lenders also don't have a ton of new deal flow. So they're staying in otherwise relatively good credits at a slightly elongated timeframe.  Chris: Yeah, I mean, I think nobody wants to get financed out at the moment, just given opportunities more broadly. So that's certainly fair. And I do agree. I mean, on the Reed Smith side, we're still seeing a bunch of LBOs, but I would say, and this isn't just healthcare, a lot of it is prepping the balance sheet. We're selling off non-core assets. We're selling off stuff that maybe wasn't integrated properly because they don't want to deal with that through a full exit process. So it sounds like it's pretty consistent across the board with what you guys are seeing. I mean, in terms of the different healthcare verticals, obviously, that's a healthcare life science is a very broad s

In this episode of our Private Equity Spotlight series, Reed Smith partner Nik von Jacobs is joined by Thomas Weinmann, Managing Partner at REIA Capital, for an insightful conversation about his work and the intricacies of the fund of funds model. ----more---- Transcript:  Intro: Hello, and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content, please contact our speakers. Nik: Hello, everyone. I'm Nik Van Jacobs, private equity partner at the Munich office of Reed Smith. And today I'm welcoming to our Dealmaker Insights series, Thomas Weinmann from REIA Capital. Welcome, Thomas. Thomas: Hi, Nik. Great to see you again or talk to you again on a podcast. Nik: Once more, it's great to have you with us, Thomas. Tell me, who is REIA Capital? Thomas: So we are basically a fund of fund advisors. We manage money from private individuals and small endowments, small pension funds, and ultimately we invest the money in private equity funds. And our speciality is basically we focus on small cap private equity funds, not on the big names, on the real small names, unknown names, but on the ones who have a better performance. Nik: That's fantastic. And I know you're very active in Europe since a long time. And today, given that we're focusing on the U.S. I think it's worthwhile that you also have a reach out to the U.S. and I'm looking forward to hearing on that. Thomas: Yes. Actually, we have been in Europe with our model for more than 10 years. I'm personally, I'm in the private equity space for more than 25 years. Now, we now move to the U.S. with a partner because we actually want to invest our own money plus the money of our investors in the U.S. to get more and better diversification into our portfolios. Nik: Interesting. And I think you just teamed up with the U.S. likewise fund of fund. Tell me about what that is like, who it is, what's the background, and what your search was like. Thomas: Yeah. Actually, their background is quite similar to ours. The people who are working there, they've been in private equity funds before, spent more than 10 years in PE funds, and then decided to basically start a fund-to-fund business. They initially did it through a multifamily approach, so a family office approach. So it was not that they started just as a classical fund-to-fund. And they, in a way, yeah, I think I would more call it we are a copy of them more, not knowing when we founded ourselves because they operate in the same manner, coming from PE, doing a very deep due diligence, only focus on small cap, and they only do it for their clients from the U.S. In the U.S. market. And we've done the same, but on the European side, so other side of the Atlantic. Now we join forces. They help us to get access to good U.S. funds. And yeah, let's wait and see what might even develop in the future. Nik: That's interesting. And where do you see the comparisons and the overlaps in terms of, well, let's say the market, the investment approach, and the process of holding those portfolio companies? Thomas: It's actually quite interesting. If you look at the small end of the spectrum, so in small cap in Europe and the US, you ultimately see that fund managers have the same approach, which sounds a little bit strange. They try to find smaller businesses. They often only buy, let's say, a small majority, and a large minority is still with the previous owners. They look into operational improvements. They do a lot of M&A or add-on acquisitions. And then they often sell the businesses to larger funds or strategic buyers. And that's something we see on both sides of the Atlantic. When you look into the return expectations, pretty similar. When you look into the real returns achieved in the past on these sort of models. Similar, where are really differences? The US market is slightly larger than the European market. I would say in the US, you have roughly 50% more fund managers. So we are more towards 18 to 19, perhaps even 100 or 2000. In Europe, we are more towards 1,200 fund managers in that size bracket. So you have to dig a little bit deeper because there's more to be digged through. And the other thing is, in Europe, often we see fund managers who are getting larger tend to become more management fee driven. In the U.S., you have that also sometimes, but the very good funds often also stay smaller on purpose. So it's much more difficult if they stay smaller to get access to them if they have a stable investor base. So you need more of an entry ticket into the funds, which is less the issue in Europe. Nik: Interesting. And in terms of the market, in terms of the assets you see, would you say there's a huge difference? Thomas: No. In reality, not really. It sounds strange. I think what you might have in some areas, you might have more assets in Europe than the U.S., for example, for manufacturing businesses. But that's also a regional thing. business services, you see a lot in the US. You might more regularly see financial service business models in the portfolio of private equity funds, less the case in Europe. But really, if you go to the bottom, it's pretty similar. It's a similar model and similar return expectations. So the good question is, why do you still go there? I think overall, on a long-term period, it's similar. But if you look in certain, let's say, timeframes, certain vintages, it might be that there's the U.S. A little bit more positive on the optics and then other times when European fund managers showing better returns for a short period of time. And if you want to have a good diversification, you should not leave out the one or the other. Nik: That's interesting. And does the market, sort of the size of the local home market, play a big difference? Does it make a difference? I mean, if you look at Europe with those various jurisdictions, various regulations, etc., are there more sort of operational costs attached to that or does that level out? Thomas: No, I think on a smaller spectrum, businesses are often very local. So in Europe, you have, of course, the borders and the languages and legal systems which are different which creates some let's say a separation of fund managers and their approaches in the US I would say often the small cap funds focus on a local area as well so they do not go all over the US to buy assets because it's just too expensive from a logistic point of view so if you're based in Chicago you regularly focus on the area in Illinois, and you just don't often go to California just to buy assets. It's just easier to do it locally, and you have sufficient number of investment possibilities also. So in this respect, I would even say it's pretty similar, but in the U.S., you have a bigger market in respect of you have not these language barriers. So you have English and Spanish, I would say. In Europe, you have many more languages. And then I think on the legal barriers, they are lower in the U.S. than in Europe. Nik: Interesting. And tell me, do you also sort of have specific sector focuses in terms of where you invest or are you very open and let it play out? Thomas: We operate a fund-to-fund model. And as we don't have the crystal ball in front of us, and we're investing over the next 10, 11 years when we do a commitment, we ultimately need to diversify. So, I think it would not be a wise decision just to go into healthcare only or in tech or business services. But what we do is we try to pick fund managers, and that's irrespective if you're talking about the U.S. or Europe. We try to pick fund managers with a sector specialization. Because very often that sector specialization is a USP. We try to find people who do something much better than, let's say, journalists. And that's where we see basically an upside, better returns, but it also helps us to diversify within our portfolio. So we want to have business services, we want to have healthcare, we want to have tech. And what helps us, if the fund managers have a clear-cut view on their industries they want to invest in and have a USP, how they basically, for example, source businesses, how they help the businesses to grow faster. If you have such a situation, then we can actively build a portfolio, which helps us to get a diversified investment for our investors and ourselves. Nik: Great. Looking at such funds, in how many funds does one of your funds then basically, or together with your partner, do you invest? And what sort of might be roughly ticket size, which you invest? And finally, what assets, in terms of the bracket, what is sort of the asset class or the range of sweet part, if you like, of those funds investing into individual assets? Thomas: There we have a slight difference. In Europe, we target to invest in 10 private equity funds out of a single product. And it ranges, the investments ranges between seven and a half to even going up to 15 million euros. And that's based on the 100 million target size we have for our fund. In the US, the target size is slightly smaller. We only want to achieve $75 million dollars for our fund there we're gonna have 20 percent of our investments in co-investments because we get the co-investments alongside our partner and therefore it's it's reasonable to do that we want to do five two to ten co-investments so basically two to four percent of the fund of each fund from our end goes into co-investments and the remaining remainder so the 80 percent goes into seven, perhaps max 10 funds there. So the diversification is a little bit smaller, but in reality, we end up somewhere between 80 and 100, 110 companies, realistically. Nik: That's a great diversification for your investors then. Thomas: Yes, yes. And it's not too diversified, but also not too, let's say,

In this episode of our Private Equity Spotlight series, we explore what the UK Economic Crime and Corporate Transparency Act means for those in the private equity industry. We focus in particular on the “failure to prevent fraud” offense introduced by this Act. Our speakers will talk you through which companies will be liable and explore how they can defend themselves against regulatory action. Private equity partner Tom Whelan is joined by Reed Smith regulatory and investigations partners Rosanne Kay and Ali Ishaq, as well as former Reed Smith partner Patrick Rappo, to share practical insights and tips in this edition of our series. ----more---- Transcript:  Intro: Hello, and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content, please contact our speakers. Tom: Hi, everyone, and welcome back to Dealmaker Insights. I'm Tom Whelan, a partner in Reed Smith's private equity group in London. I'm joined today by Roseanne Kay, Patrick Rappo and Ali Ishaq. Before we dive in, I'll let them briefly introduce themselves. Roseanne. Rosanne: Hi everyone, I'm Roseanne Kay. I am a partner in Reed Smith's London office, specialising in white-collar crime. I focus on financial services litigation also. Tom: Patrick. Patrick: I'm Patrick Rappo, formerly headed up the Bribery and Corruption Divisions at the UK Serious fraud office and advise some members of the House of Lords in relation to the legislation that we're going to be talking about today. Tom: Excellent. Ali. Ali: Hi, Tom. I'm a partner in the firm's London office, and my practice focuses on regulatory investigations and enforcement proceedings, profane claims, and also general commercial litigation and arbitration. Tom: Great. Thank you all. Well, today we'll be discussing what the Economic Crime and Corporate Transparency Act means for the private equity industry, with a special focus on the failure to prevent fraud offence. There's a lot to cover, so let's jump right in. Ali, why are the two new corporate criminal offences relevant to private equity and their portfolio companies? Namely liability for failing to prevent fraud by associated persons and liability for senior managers who commit economic crimes. Ali: Thanks, Tom. So this is a new UK offence, which is the failure to prevent fraud offence, which is coming into force in September 2025. It was brought into the UK statute books together with a new senior manager offence, which came into force in December 2023, and which I'm going to touch on very briefly and to begin with. Now, both of these new corporate offenses are part of the UK government's plan to make it easier to find corporates criminally liable. Starting very briefly then with the senior manager offense. This new offense makes corporates criminally liable for the actions of their senior managers acting within the actual or apparent scope of their authority who commit economic crimes. It is also going to apply to private equity companies, and like the failure to prevent fraud offense, has a wide extraterritorial effect. Now, a senior manager is defined as someone who plays a significant role in making decisions about how all or a substantial part of the organization's activities are to be managed or organized, or in actually managing or organizing a whole or substantial part of those activities. Now, the applicable economic crimes which a senior manager can commit and therefore make the company liable for are broad in range and include offenses such as cheating the public revenue, false accounting, money laundering, bribery or fraud, and even sanctions violations. So that very briefly was the senior manager offense. Moving on then to the failure to prevent fraud offense. Now, this offense is important to private equity firms and their portfolio companies for two key reasons. The first reason being, in very simple terms, that the failure to prevent fraud offense can hold a private equity company liable for fraudulent actions committed by associated persons if it can be shown that the private equity company or its clients benefited from that fraudulent act. These associated persons whose actions can create liability include employees and most notably both portfolio companies and even the GP. And adding to this concern is the fact that the failure to prevent fraud offenses is broad in nature. It covers a range of fraud offenses from abuse of position and failing to disclose information to fraudulent trading and false accounting. So under this new offense, there are a range of fraudulent acts that can be commissioned by a portfolio company or the GP that results in liability ultimately for the private equity company. Now, the second reason why this offense is of relevance to PE firms is that the offense is a strict liability offense, which means that to be found guilty of this offense, the authorities do not need to establish criminal intent or even show that the entity had knowledge of the offense being committed. So once the offense has been committed, private equity company cannot come out and say that they were not aware of the portfolio company's action to avoid liability. In fact, the only defense would be for the firm to show that it had reasonable procedures in place to prevent the fraud. So to summarize all of that in a few sentences, the failure to prevent fraud offense has meant that PE firms now face increased risk of liability from the daily operations of their portfolio companies, and this risk of liability is quite significant. However, not all entities will fall under the purview of this offense. It's only going to apply to an entity within a PE structure that meets two out of the three qualifying criteria. So firstly, if the entity employs more than 250 employees. Secondly, if the entity has total assets worth more than £18 million pounds and/or the entity has a turnover of 36 million pounds. Now, these criteria apply to the whole organization, including subsidiaries, regardless of where the organization is headquartered or where the subsidiaries are located. So that Tom is a very quick summary as to why these two offenses are something PE firms need to consider very seriously. Tom: Thank you, Ali. And we go on now to Roseanne. So Roseanne, what sort of conduct is going to create a problem under the failure to prevent fraud offence for private equity and their portfolio companies? Rosanne: So the way it works, Tom, under this failure to prevent fraud offence is that there are some specific base fraud offences which are referred to in the act that brought this new offence into force or is going to bring it into force, which must have been committed in order for a corporate to then have the criminal liability of failing to prevent that fraud offence. And what I'm going to do is refer to some practical examples. But before that, I just wanted to mention a few points, which are that we're not dealing with new kinds of misconduct. So the sort of practical examples that I will mention will be recognisable types of fraud. But what's new is that that misconduct will now more easily create criminal liability for the corporates under the new offence. The second point to mention is that the fraudulent conduct can be looked at from different perspectives, from the perspectives of the different entities and individuals who might be involved in the typical private equity structure. So although we're focusing on the failure to prevent offence, the same misconduct may give rise to liability for different individuals and different entities under different offences at the same time so for example the specific employee who may have done the the wrong act will be themselves liable personally for a fraud offence there may be liable liability for a corporate under the failure to prevent offence, in addition to liability for entities under this new senior manager offence, which Ali mentioned, if there were senior managers involved in the commission of the offence. So turning now to some of the practical examples, there were sort of four headings that I wanted to mention. The first is fraudulent financial misrepresentation. And here we're talking about some form of misrepresentation, for example, of the fund's performance. For example, if an individual within the general partner provides inflated valuations or misrepresents the performance of portfolio companies to attract investors or false statements to the limited partners or misleading disclosures, those kinds of fraudulent financial misrepresentations are the type of base fraud offence which could then create liability for failing to prevent fraud. Another area, misrepresentation to lenders or regulators. So, for example, some misleading information in a loan application to banks or private credit lenders to secure financing. Similarly, could amount to one of these fraud base offences, which could give rise to a failure to prevent fraud offence on the part of the entity. As I mentioned, these are sort of misconduct that won't be new to you and the listeners of this podcast. Other examples I'll mention briefly would be market manipulation, insider dealing. Obviously, we know that those are offences in any event, but they will now give rise to additional liability under this new offence, as could some fraudulent conduct in the portfolio companies, for example, accounting fraud or some tax evasion or false expense claims, all of which could be appropriate fraud that could give rise to liability. Tom: Thank you very much, Rosanne, for that level of detail and some of the examples where such fraud is caught by this legislation. So I'm going to turn now to Patrick. From a practical point of view, Patrick, what do private equity managers and their portfoli

Against the backdrop of a new administration, the introduction of new HSR rules in early 2025 will impose significant additional burdens and risks on deals subject to premerger notification in the United States. How will new DOJ and FTC leadership impact antitrust enforcement, can we expect the private equity industry to remain a key target under the new administration, and what can private equity firms do to prepare? In this episode of our Private Equity Spotlight series, private equity M&A partner Nick Gibson is joined by antitrust partners Michelle Mantine, Ed Schwartz and Chris Brennan. ----more---- Transcript:  Intro: Hello, and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content, please contact our speakers. Nick: Welcome back to Dealmaker Insights, the Reed Smith podcast series spotlighting the private equity industry. I'm Nick Gibson, a private equity M&A partner in the Chicago office of Reed Smith, and I'm excited to have antitrust partners Michelle Mantine, Ed Schwartz, and Chris Brennan here today to discuss the antitrust outlook for 2025 and what changes the industry can expect and start preparing for. We have a lot to cover today, so let's jump right in. So the U.S. presidential election was a few weeks ago, and a second Trump administration is quickly approaching in January. Let's level set for the audience. What is the current antitrust environment for private equity, and were there any major developments over the last four years that specifically affected M&A activity by private equity firms? Ed: Yeah, Nick, good question. This is Ed Schwartz, and I'll jump in, and I know Michelle and Chris are going to have thoughts as well. So, I mean, the short answer is there's been a sea change. Historically, the antitrust agencies, both the DOJ and the FTC. Really only focused on private equity and the nature of ownership to the extent that it related to adequacy of the divestiture buyer in a deal where divestitures were required. And that's an issue and a concern that goes back with the agencies for some time. Will a private equity firm be an adequate divestiture buyer and compete effectively and aggressively? The world has changed in that regard. Pretty early on, certainly by 2022, both the DOJ and the FTC were making very aggressive statements about their intent on focusing on private equity and whether private equity were going to be adequate or an acquisition by private equity would be adequate in order to preserve competition in a particular industry. And both Lina Kahn and Jonathan Kanter were making statements along the lines that we're going to take a muscular approach and expressing concerns about whether PE firms were in fact well-suited to compete as effectively and aggressively as other potential buyers. And it didn't take long for the agencies to begin taking action. And so we saw the first sent decree between the FTC and a private equity firm, and this was involved JAB and its subsidiaries, which owned a bunch of veterinary care clinics in Texas. And the Kitsets Decree. Was negotiated and effectuated and required significant divestitures. And we saw also a case a lot of folks are going to be familiar with, and that's the FTC's Law of Citizens, Welsh Carson, a private equity firm, and its portfolio company, which owned a bunch of anesthesia companies. And the complaint that was filed focused on roll-ups in that industry for the last, you know, the prior roughly 10 years. And this is the first case that we've seen that was like this in a number of ways. One, it focused on roll-ups by a PE portfolio company. Two, it sued to block the deal under Sherman Act Section 1, so it hasn't seen in a long time. Ultimately, the case was dismissed by the district court judge, importantly, because Welsh only owned a minority share. But, I mean, this was really a watershed moment that one of the agencies sued on this basis. So the short answer is there has been a sea change. I mean, it's effectively a complete turnaround in thinking about how the antitrust agencies think about ownership, the nature of ownership, and how effectively they may compete. And I think it's worth adding that since their loss in the Welsh Carson case, the agencies haven't let up. They've continued to issue a number of statements, sometimes along with other agencies, you know, really pounding on the fact that they're going to be looking very, very closely at private equity firms and just how effectively and aggressively they will compete following their acquisition. So the heat is very much still on with PE firms, at least in this administration. Michelle: And I couldn't agree more. I mean, really, since Biden's executive order back in 2020, the heat's been on and sort of been being turned up, right? With respect to almost every angle of antitrust enforcement, and PE has had sort of the share of the limelight, you know, often with industries like healthcare and tech, who sort of usually have that role from an antitrust perspective. Private equity has joined them. When you look at the revised merger guidelines at the end of last year and their focus on private equity, the final HSR rules, which will go into effect February 10th that were largely done under Lina Kahn and their focus on private equity and the ownership structures. The agency's public forum last March, really delving into private equity ownership issues and providing a forum for folks to sort of share their stories about private equity. In my view, it's been much of a one-sided story to date, unfortunately. The only real sharing of the other side, so to speak, the benefits of private equity has been shared with a public filing by an amicus brief in the USAP case where an interested party and association sort of laid out how private equity has also benefited from competition and market. So it's an interesting dynamic at the moment. The heat is very much on and definitely a challenging environment for private equity. Chris: I think some of this too, the numbers bear out that this isn't necessarily just the Biden administration. It's also the market over time. In 2022, two out of five deals involve some private equity participant. That is up way, way beyond where it was in 2000. So over the last two decades, you've seen a massive increase in private equity participation. Nick, I'm sure you have seen that in your practice. And so I think a lot of what we've seen from the Biden administration is really a feeling that enforcers were asleep at the wheel. Right. And when we can think about that in terms of other ways in which this has been a very active administration, we know that private equity is here to stay and that those rates may actually increase. The question is really going to be what happens if a new Trump administration takes a different approach. Ed: That's a really good point and an interesting perspective, Chris. And I think one that does bear emphasis is you could look at what's happened as the antitrust agencies finally capping up with the massive change in the nature of ownership in the United States that shifts from public equity ownership to private ownership. And, you know, and I agree with you. I think that perspective does bear upon, you know, or does help us think about what's going to happen in the future, you know, both in the Trump administration and administrations beyond. I mean, I think it may be too easy to chalk up what we've seen. Under the Biden administration, with private equity antitrust enforcement as well, it's more the same. We've seen very aggressive, some might say hyper-aggressive enforcement efforts to greatly, if not grossly, expand the scope of antitrust enforcement and chalk it up maybe too easily to that. And we do have to keep in mind that to some extent it arguably is attributable to the massive change in ownership and investment in the United States. It's probably worth just mentioning one more thing, and that is, you know, a lot of folks who listen to this know this, but the revised horizontal antitrust guidelines did include language, new language that expressly addressed private equity investment. And the language is where one or both of the merging parties has engaged in a pattern or strategy of pursuing consolidation through acquisition, the agencies will examine the impact of the cumulative strategy to determine if that strategy may substantially lessen competition or tend to create a monopoly. So this focus on roll-ups isn't, of course, limited just to a focus on private equity, but it does seem that that language was included in particular for the purpose of signaling that they're going to be looking hard at private equity. So one of the questions, and I don't want to jump ahead too far. So one of the questions that we're all thinking about is what changes are we going to see and what pullbacks are we going to see in enforcement policy under a Trump administration? Some of them are probably easy to predict. The FTC's policy statement about Section 5 enforcement issued in November 22, that's gone. I think we can all be pretty sure of that. Are the agencies going to revise yet again or even just withdraw? The revised horizontal merger guidelines and this new language with it. We'll see. If we take a step back and we look at what's happened in antitrust enforcement and merger enforcement in general with respect to private equity firms, I think you could look at it and, conclude that it's really a lot like we've seen with a lot of the merger enforcement efforts across the board under the Biden administration. I mean, put cynically, a lot of talk, not much action, and not much success. And I think to some extent, the agencies may be okay with that. Obviously, they don't like losing in court.

In this episode of our Private Equity Spotlight series, Reed Smith partner Nick Gibson is joined by Patrick Floeck, a principal at Valesco Industries, to learn more about his work in the lower middle market, with a focus on private and family-owned businesses. ----more---- Transcript: Intro: Hello, welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content through this series, please contact our speakers.  Nick: Welcome back to Dealmaker Insights, the Reed Smith podcast series spotlighting the private equity industry. I'm Nick Gibson, a private equity M&A partner in the Chicago office of Reed Smith, and I'm excited to have Patrick Floeck of Valesco Industries today as our guest. Patrick and his team focus on the lower and core middle market, particularly in private and family-owned businesses, which we'll dive into today. But first, I'll turn it over to Patrick and let him introduce himself and Valesco. Thanks for joining us today, Patrick. Patrick: Hey, thank you, Nick, and appreciate you having me on. A little bit about myself and Valesco. We're, as you mentioned, a lower middle market private equity firm focused on primarily controlled buyouts and particularly like to be the first institutional capital. We pride ourselves with a long history of being a really good partner and helping family and founder-owned and operated businesses transition into that next stage and evolution of their business cycle. And what that has evolved into is utilizing our fund of capital to help employ things like process and procedure. Building out management teams and putting the right people in the right seats, putting in place the appropriate systems to help manage the business, to allow it to capitalize on the already strong demand that is in the market for products and services that the company provides and offers. And so we've developed a core strength of being a very operationally focused private equity firm that truly partners with the management team to help drive the critical agenda. Our focus is on businesses that are roughly $5 to $15 million of EBITDA, and primarily in the manufacturing, distribution, and some business services. We are industry and sector agnostic. It's easier to say what we don't focus on, which are specialty industries like oil and gas and other commodities, tech, software, healthcare services, et cetera. But if you can make it in a manufacturing plant and it has a strong demand and a unique value proposition, those are the types of companies that we really find attractive. I am a principal at the firm. I've been with the firm about 10 years. I run our origination and marketing strategy, as well as sit on a few of our portfolio company boards and help fundraising and other activities at the firm and sit on the investment committee. Nick: Very interesting. And what about your and Valesco's approach distinguishes you from other shops that might also take pride in partnering with management and kind of sit in the lower middle market? Patrick: It's a great question that I've been giving a lot of thought to because it's one that I think is always asked, whether it be by a management team or an LP. And I think, you know, Valesco has been around for 30 years and what we've been doing for the last 30 years, going all the way back to our founders that started out as independent sponsors through our first fund, which was very small, all the way now to our third fund. Which is $435 million. But our strategy and the way that we partner with business owners has never changed. We never wanted to be or set out to be an asset manager or a financial engineering private equity firm that looks to make a platform acquisition and do a bunch of lower multiple add-ons and cut costs in a way to producing a return. We really do focus on building the enterprise value via sales growth, better processes, better systems, capturing additional market share and wallet share, and really growing the enterprise value of the organization all while producing employment opportunities. Employment growth, etc. And so we really focus ourselves on investing in opportunities where we can invest in the growth of a business, as opposed to trying to cut costs and manufacture a return. We believe that returns should be the result of a better business and a better operation after we are finished with it. Nick: That makes a lot of sense. Where is Valesco at in its fundraising cycle and what are you hearing from your LPs this year that might differ from previous years? Patrick: We are fortunate in that we finished our most recent fundraise in the summer of 2023 and had raised the majority of that capital by the beginning of 2023. The last 12 to 18 months has been interesting. One of the things that we've been hearing is, number one, the pandemic has increased the hold period and life cycle for assets to the tune of about 18 to 24 months. And so a lot of funds that are looking to raise capital are being pressured to have to exit. However, it's not been the greatest exit environment given the increase in interest rates, the ups and downs of different headwinds in different sectors of the economy, the election coming up. And so what we've heard is a lot of allocators are looking to consolidate their commitments back to a handful of GPs that they know well, which is a little bit different from the last decade or so where we've heard that a lot of allocators had diversified their portfolios amongst a bunch of different GPs. And now it seems like they're starting to make bigger commitments to a more consolidated group of general partners. Nick: Got it. And you touched on this a little bit in terms of kind of understanding the concerns of management and family owned businesses. What are you hearing from founders and targets this year, particularly with, as you just noted, election seasons in full gear now? Patrick: Listen, I think I'm not an economist, but in my own opinion is that we've been in a recession for the last 12 to 18 months. It's been a bit of a slow burn. The indicators from history, I think, are different in that we are primarily a services-based economy in the new millennium relative to the past. And so the traditional indicators around what precipitates a recession, I think, are different. You also look at consumer spending and inflation. People don't save as much. There's not the incentive to save or invest as much across the economy. And so I think a lot of businesses are facing challenges and headwinds that have made them flat to down this year. Despite the consistent increase in consumer spending and inflation that we've had over the last few years, I think the recent Fed rate cut of 50 basis points is a really good indication that we've got inflation under control and maybe we were a little bit too aggressive and it's time to pull back a little bit. I certainly think that there is some uncertainty around what happens with the election. The two parties' policies and agendas are so different that I think it's creating a lot of uncertainty for business owners, for private equity firms, and it's manifesting in a way that everyone is just kind of putting deal-making on pause. Because if you have certainty, whether you like the outcome or not, you can plan for it and you can forecast and budget, but you can't plan and forecast for uncertainty. So, we're really not seeing a whole lot of activity right now in Q3 and likely into Q4 this year, but my hope is that by the first part of 2025, it will be a good environment for M&A transactions to pick back up. Nick: What are some of the trends you've seen, particularly in your end of the market, maybe some that aren't the obvious that are talked about as much? Patrick: Yeah, it's certainly kind of going back to, you know, non-cyclical and non-consumer facing manufacturing businesses. You've seen kind of a move away from, you know, the residential services, roll ups, the, you know, the med spas, all the things that are have been focused around consumer spending, as well as anything that has financing. Related to it, and really gone back to your old economy, manufacturers that are supporting industries like infrastructure, food and beverage, things like that. Even agricultural deals, we've seen quite a few of. I'd say anything that is large old economy type businesses, as opposed to anything that's service-based or consumer. We really haven't seen a whole lot of activity nor appetite. Nick: Got it. All right, bonus round now. Patrick, you're a big golfer. We first met over a round of golf and had a lot of fun. What is your favorite golf club in your bag? And then second part is, if you were a golf club among a set of clubs making up your deal team, what club are you and why? Patrick: Yeah, it's a fantastic question. And I appreciate the heads up on this one because it gave me some time to think about it. But I am definitely a wedge guy. I carry four wedges regularly. And the reason I like a wedge of any different degree is because it's such a utility club that you can utilize from multiple different distances, whether it's a full swing, a half swing a chip around the green you can go a high flop shot you can go a low bump and run a spinner that checks and the reason I like it is that if you can get good with that club you can typically get yourself out of a bad situation so if you hit an errant tee shot and you can put yourself back into the fairway with a wedge in your hand you still have an opportunity to get up and down for par. If you miss a green and you can utilize a wedge shot that's going to get you close to the hole and still have an opportunity to make a par putt. That's what I really like about it. That's where I've spent a lot of time trying to m

This episode features a panel discussion on the current state of the health care private equity market, comparing it to previous years and exploring how the industry has adapted, and continues to adapt, to remain competitive. The panel was moderated by Chris Sheaffer, global vice-chair of Private Equity at Reed Smith, and Nicole Aiken-Shaban, Life Sciences & Health Care partner at Reed Smith. Panelists included Tony Crisman, managing director and head of Healthcare IB at Stout; Daniel Schultz, managing director of BD at Webster Equity; Kevin Reilly, managing director at Ally Bridge; Brandon Cohen, principal at H.I.G. Capital; and Brian Bewley, Life Sciences & Health Care partner at Reed Smith. ----more---- Transcript: Intro: Hello, welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content through this series, please contact our speakers.  Chris: Welcome to the panel. Appreciate you guys taking part in this kind of state of the healthcare healthcare market panel as part of our private equity healthcare forum being hosted in the New York office today. We've got a great panel together. Maybe before we start, we'll kind of kick things off with introductions. My name is Chris Sheaffer. I'm vice chair of Reed Smith's private equity group.  Nicole: Nicole Aiken-Shaban. I'm a partner in Reed Smith's Philadelphia office with a focus in healthcare regulatory and transactional work, and particularly in the private equity space.  Tony: Tony Crisman, Managing Director, Head of Healthcare Investment Banking at Stout, 25-year healthcare investment banker. I was at Lincoln for 15 years before that and started out at an old name firm, Dain Rauscher Wessels.  Brandon: Brandon Cohen, I'm a principal at HIG Capital based out of Miami. I spend all my time in healthcare.  Daniel: My name is Dan Schultz. I'm a Managing Director at Webster and I manage all of our business development.  Kevin: And I'm Kevin Riley. I'm Managing Director at Ally Bridge Group. We're a life sciences-focused healthcare investor, predominantly in biotech and medtech, mainly focused on growth stage transactions.  Brian: Good afternoon. My name is Brian Bewley. I'm in our life sciences and health industry group like Nicole and heavily focused on private equity transactions.  Chris: So let's just dig into it. I mean, private equity investing in healthcare has been a very hot topic over the last couple of years. You know, the market generally between interest rates, you know, macro events, obviously an upcoming election. There's been a lot of focus on the regulatory side recently. Look, Tony, you're sitting closest to me. I mean, look, on the investment banking side, you guys obviously see quite a lot. I mean, how has 2023 been? How's the first ’24 been? How's the first half of the year?  Tony: It's been an interesting start to the year. I think that there was a lot of pent up demand, an interesting thing that I always think about. The beginning of my career, capital was the scarcity and assets were the commodity, and we're completely upside down. And we were trending that way over the last 20, 25 years. But I think a lot of people were really hoping for a tidal wave of transaction activity to start ’23, or start ’24. And I think for the most part, what we've seen coming to market are a lot of assets that bankers and private equity have been kind of holding on to maybe late ’22, ’23 might have been their initial timing. But just looking at the overall market dynamics and things of that nature, they were kind of held. So it really started to perk up in late March. And I do think that the regulatory dynamics, they always drive deal activity within healthcare, which is why it's technically attractive. And so you do see a lot of portfolio adjustments through COVID and into the current day in terms of where healthcare investors are looking to deploy capital, not just recession resistant, but pandemic resistance.  Chris: Brandon, what are you guys seeing on the sponsor side? I mean, have you guys been hearing from your LPs a little bit more? I mean, how are things going with HIG?  Brandon: Yeah, I'd echo some of the comments. It felt like the first month or two of the year were a little bit slower than expected. I was actually looking back at some data. Our healthcare deal volume is probably up 30%, 40% in 24 year-to-date versus the same period in ’22, ’23, still off of the 2021 peak. The interesting thing that we've seen is just the quality of the assets. You mentioned in, people holding things back. And we've seen, it feels like the number of deals getting done are far fewer than that 2021 level, despite the volume being fairly close. And it feels like buyers are still pretty cautious, right? We've seen a lot of instances where a banker tells me, hey, got a dozen IOIs or multiple turns higher than you. And weeks later, that deal kind of falls apart. And on the sell side, we've seen several processes where buyers kind of complete most of their work and don't show up at the end. And, you know, I don't know that that's healthcare specific, but it just feels like buyers are fairly cautious and, you know, sellers don't necessarily want to take a discount to 2021 levels.  Chris: Yeah. I mean, I think that extends well beyond healthcare. We're seeing the same thing regardless of market and sector. It just seems like the valuation still needs to be bridged a little bit, both healthcare and otherwise, but hopefully, you know, we're optimistic for the back end of the year here.  Nicole: Brian, this one's for you. Chris did mention some of the recent changes in the healthcare industry that have been happening recently. Could you give a brief overview of those to the participants here today and thoughts on what investors should be thinking about on the horizon when they're looking to invest in the healthcare space?  Brian: Thanks, Nicole. I actually printed off something because this is a year where there's quite a bit of activity, so it's unusual. There's been a lot of developments on both the state and federal level. I'm sure most of you have been following it. At the state level, several laws have been passed. There's some laws that are pending. Really around, I think approximately 13 states now have promulgated or adopted essentially many HSR laws requiring notice and at times approval by the state governments for private equity transactions. There are some states that are, for lack of a better way of saying it, worse than others, more restrictive. California, Illinois, Minnesota, and New York are the four that I wrote down that are incredibly restrictive because they require pre-merger notification requirements and then also approval of the transaction. At the federal level, similarly, there's been quite a bit of activity from the antitrust side. And I'm not an antitrust attorney, but because I do a lot of of work in this space. It's obviously on the top of minds of us as counsel, but also our clients. The first thing, FTC, DOJ, and HHS issued a joint request for information in March of this year to examine private equity's role in healthcare consolidation. They actually extended the deadline for responses to June 5th, which has already passed. Obviously, we don't know the outcome of that RFI and what they're ultimately going to do with it. But I assume that probably by the end of the year, we'll see some activity resulting from that RFI that the government issued. And as you all probably know, because you've gone through deals that require these HSR filings, but FTC has proposed changing to the filing requirements that would increase the disclosure obligations for healthcare deals. Usually I'm generally reluctant to talk about proposed legislation because it's just proposed and you don't know for sure if it's going to come to fruition, if it will ultimately result in some sort of law that's promulgated. But I think it was about four weeks ago, Senators Warren and Markey proposed, and this is the exact title of it, Health Over Wealth Act. There's a lot of different things that it requires. If it's successful, it will require private equity firms to obtain licenses from the Department of of Health and Human Services to invest in health care entities. And if you fail to qualify or obtain a license, you would be restricted from doing deals in the health care space and potentially would have to divest portfolio companies. This would also allow HHS to block deals pending their review, and then it would also require that the PE firms disclose financial and operational data, including debt levels, political spending, what wages are going to be, and what facilities are going to be utilized and not utilized. And then the last thing that would be required, again, if this is successful, is that there would have to be an escrow account. You'd have to establish an escrow account to cover all health services costs for five years should there be facility closures. Now, again, this is their proposal. I think there's quite a bit. I don't know if it will be successful. And frankly, even if it is, I think it's going to be challenged because of how restrictive this law would be. And frankly, it's anti-capitalistic. And so I'm not sure how much legs or how if it will actually get legs but it is certainly something that we should all be paying attention to and then I guess the last thing and this is more of a general theme and some of you are probably members with like the American investment council but a lot of the activity that we're seeing at the state and federal level you know is the result of really one-sided narratives that are being pushed about private equities role and and health care transactions and obviously at the FTC

Reed Smith partners Mark Goldstein, Cindy Minniti, and Michelle Mantine come together to break down the Federal Trade Commission's final rule on non-compete agreements and how it may affect U.S. businesses. ----more---- Transcript: Intro: Hello, and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content, please contact our speakers.  Mark: Welcome back, everyone, to Dealmaker Insights. My name is Mark Goldstein. I'm a partner in Reed Smith and Labor and Employment Group, and I'm joined by my colleagues, Cindy Minniti and Michelle Mantine, both partners as well at the firm. Today's topic is non-compete agreements. Been all over the news lately. Non-compete agreements have long been used by businesses to bar key employees from leaving their business and going and setting up shop across the street the next day. There are a whole host of reasons why businesses may want to impose a non-compete agreement on an employee. However, over the past several years, state legislators have worked increasingly scrutinized the use of non-compete agreements that passed a whole host of legislation. And finally, the U.S. Federal Trade Commission in April 2024 issued a final rule that if it takes effect, would prohibit virtually all pre-existing and future non-compete agreements across the U.S. So I'd like to turn it over to my colleagues today, Cindy and Michelle, and together we'll break down what the Federal Trade Commission's final rule says and how it may impact U.S. businesses. So, Cindy, let me start with you. Can you tell us a little bit about the background to the rule?  Cindy: Sure. Thanks, Mark. Like you said, there have been a lot of state legislation recently over the last couple of years, really trying to limit the use of non-compete agreements. And President Biden in July of 2021 directed the Federal Trade Commission to come up with some federal legislation really limiting the use of non-compete agreements. In an effort to really be wide sweeping in January of 2023, the FTC put out a proposed rule, which got a lot of attention from businesses and a lot of people commented on the proposed rule during the comment period. There were about 26,000 comments to the proposed legislation. And then ultimately, the proposed rule is now out as of May of this year, it was published in the Federal Register. And like you said, if it does go into It will go into effect in September. But it really is an absolute ban to non-compete agreements. There are very, very limited exceptions, but this is really an absolute ban on current and future non-compete agreements for virtually everyone. There's a small exclusion for senior executives and some other minor exclusions, but really this is an effort to really stop people from really enforcing non-competes on their workforce, really open up people and to be able to go to competitors. It's also interesting that it's not just for employees. The proposed rule is for anyone that's really doing work. So So employees, contractors, anybody that's got any kind of a relationship. So independent contractors, interns, it's really very broad sweeping.  Mark: That's a great point, Cindy. And the definitions within the final rule are really key and are extremely broad. The definition of worker, as you said, the definition of non-compete clause is quite broad. Michelle, let me ask you, because I know that this is a question a lot of our clients have asked. We understand that future non-compete agreements after the rule takes effect, if it takes effect in September as the currently scheduled effective date, those would not be above board. But what about pre-existing non-compete agreements? I know Cindy alluded to it, but how does the final rule adjust pre-existing non-competes?  Michelle: No, it's a great question, Mark. And as Cindy said, it's pretty broad sweeping. Yes, the final rule absolutely applies to pre-existing non-compete agreements. There is sort of or are limited exceptions. The exception that I would note here in particular is for pre-existing non-compete agreements entered into with senior executives. And that term, like so many of the other definitions that accompany this rule, is defined very carefully and specifically in terms of what it means to be a senior executive. And if you fall outside of that category, the ban does apply. With respect to those other pre-existing non-compete agreements, those not with senior executives, I mean, the ban is saying, as Cindy pointed out, that the agreements will not be enforced. First, they are illegal, and that would be after the final rule's effective date, which currently absent any changes from it based on litigation is September 4th. The FTC is also saying as part of this guidance that the employer must provide clear and conspicuous notice to the worker of these sort of factors to make it very clear to the worker that if they have this pre-existing non-compete agreement, it's going away very soon. So the exceptions are extremely narrow. And again, something that if you're looking on relying on an exception for the senior employees, the senior executive employees, or in another context, you really need to look closely at the definitions to make sure you're in a safe spot.  Cindy: Michelle, that's a great point about the definitions. Another question we get a lot is when you talk about non-compete, what about competitive activity during employment? And I think it's important to note that this is a broad sweeping regulation for post-employment restrictions. So we still are able to have employers banning current employees from having any sort of competitive activity during their employment, that this is really post-employment competitive activity that we're talking about. And I think it's just important to note.  Michelle: Great point, Cindy. Let me ask, are there any exceptions? I know, obviously, we have the carve out for pre-existing agreements with senior executives, which from a high-level perspective, the rule essentially defines as someone making at least $151,000 a year and in a policymaking position. Besides that, are there any, Cindy, let me ask you, are there any exceptions to the rule? Some state legislatures, like in California and Minnesota, who have adopted all-out bans on restrictive covenants, do still include a carve-out, for instance, in the sale of business context.  Cindy: Yeah. So I think that's probably one of the most talked about things right here is it's a bona fide sale of business is an exception. And there was a lot of discussion about what is a bona fide sale of business and are there percentages or a threshold that should be considered. Considered, and that was a lot of the comments and a lot of the consideration, but this final rule does have a carve-out for bona fide sale of the business so that you could have a restriction there because there are other interests at stake. And there are two other sort of litigation exceptions as well. So if there was litigation or if there was some interest in enforcing the non-compete before the rule goes into effect, or if there's a good faith belief that the rule is inapplicable. So, you know, I guess if you're arguing, is someone really a senior executive, or if you believe that they are a senior executive, something like that. But so those are the two sort of litigation exceptions. But I think really, the sale of the business is probably the one that we're going to see the most. Mark, did you have any thoughts on the sale of business and all of the discussion and back and forth, you know, before the final rule was proposed?  Mark: Yeah. So I think that the sale of business exception probably is the biggest change between the proposed rule and the final rule. Generally speaking, the proposed rule that came out in January 23 is conceptually the same as the final rule that came out in April, May of 2024. Some of the language was tweaked, but the underlying concepts are the same. But the sale of business exception changed substantially. And the reason for that is because in the proposed rule, the FTC said that this carve out for the sale of business would only apply if the person that you're trying to bound by a non-compete is purchasing or owns 25% or more of an ownership interest in the entity at issue. So if somebody had a 12.5% ownership interest, the sale of business exception would not apply and they could not be bound by a non-compete. So in the final rule, the FTC dropped that 25% requirement, really conceding that there was no specific underpinning or justification for that metric. However, the FTC has said that despite this, they do anticipate rigorously looking at transaction to make sure that folks aren't entering into what they call sham deals. So essentially make sure there's a genuine bona fide sale at issue, not some sort of attempt to evade the FTC's non-compete ban.  Cindy: I’m going to jump in on that. I think that's really important because we were hearing a lot of questions when we saw the proposed rule about what really is a sale and what if there are some corporate maneuvers that can happen, would we still have the enforceability of these restrictions? And I think that the comments and the commentary took a long, hard look at that and tried to make this as broad as possible.  Mark: Yeah, that's exactly right. And the FTC even calls out things like repurchase rights or mandatory stock redemption programs and makes clear that those are not bona fide sales transactions, so they would not be subject to the exception. Obviously, particularly in the private equity space, businesses will be looking to capitalize and see if there are transactions that can be deemed bona fide that perhaps are broader than the scope initially con

In our latest episode of our Private Equity Spotlight series, Reed Smith partner Nick Gibson is joined by Matthew Carlos, a principal at New Water Capital, for a deep dive into the unique aspects of Lower Middle Market Private Equity. ----more---- Transcript:  Intro: Hello, and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content, please contact our speakers. Nick: Welcome back to Dealmaker Insights, the Reed Smith podcast series spotlighting the private equity industry. I'm Nick Gibson, a private equity M&A partner in the Chicago office of Reed Smith, and I'm excited to welcome Matt Carlos of New Water Capital as our guest today. I've really enjoyed getting to know Matt and his team who have focused and thrived in the lower middle market. Matt wears a lot of hats at New Water Capital, and that's one of the topics we'll dig into a bit today. But first, I'll turn it over to Matt and let him introduce himself and New Water Capital. Great to have you here, Matt. Matt: Thanks, Nick. Appreciate you having me and happy to chat through the latest and greatest of New Water here. So I can dive right into a quick background on myself and on New Water. So I'm a principal here at New Water Capital. Been with the guys now for over seven years. Joined back in January of 2017. The fund officially started in 2016 and was originally a spin out of Sun Capital Partners. So Jason and Brian spent around a decade together at Sun. Saw Sun grow from a few hundred million under management, multiples of billions. I'm sure as as you know. And the rationale or the reason to spin out and do their own thing, create New Water, was to refocus on the lower middle market. And we've incrementally refined that for us to be really focused on what we call blue-collar industries. So manufacturing, industrial services, packaging, distribution. That really covers the majority of what we're focused on. From an end market perspective, we're a bit more agnostic. So if you look at in our portfolio. It's food and beverage, it's industrial technology, auto, packaging, you name it. And so we do tend to be more operationally focused and much more opportunistic. So we've got an in-house ops team, ex-CEO, CFO, COO type folks who work exclusively for New Water, so not consultants on hired guns. And so they are invaluable in dropping into our portfolio companies and help them think through next steps. So there's just creating KPIs, budgeting, walking the shop floor, look at efficiencies, and or just being a shoulder to cry on, quite frankly, as we go through growing pains or integration. And so really a valuable part of the team, but it helps kind of differentiate what New Water does in the market, which is really focused on where we can help portcos grow, improve, and. Get to the next level. Nick: That's great. Can you talk about the various hats that you wear in your role particularly, and maybe how that differs in approach from other private equity firms? Matt: Sure. Yeah, we are a lean team. And so because of that, like you mentioned earlier, we do wear a lot of hats. First and foremost, I think other private equity funds that are our size and focus in our industries, I think it's very typical for those firms or a lot of our brethren these days to have a designated business development arm. We at New Water do not at the moment. I think at some point in the future, hopefully we will be large enough to where it's needed. But at the moment, we don't. And so what that means is that myself and the other folks on the deal team here, we will kind of pass the hat or pull straws to just do the best we can to attend as many events and conferences, to be doing city visits visits, and meeting with intermediaries and bankers and lenders as much as we can. And of course, that takes away from, I guess, what you can say is our day job or what we are focused on most actively, which is portfolio management and getting deals done. The flip side is that I think if you were to poll the audience here in the deal team, we really do like being out in the market. I think it gives us a flavor, some firsthand experience of what people are saying, what other private equity funds are experiencing in real time, what bankers are seeing in real. And another angle to that is that a lot of our investment banker and intermediary friends, they feel like they have access directly into the deal team when they see us out on the road as well. So I think it works both ways. But additionally, what really makes us different and what we really focus on is on that ops part of the business. And so not just the operations team, do they focus a ton on portfolio management and portfolio improvement. Really, the deal team does as well. We oftentimes are just an extra set of hands for our leadership teams that are portfolio companies. And so when you get down with diligence and the ink dries on the purchase agreement, the folks who know that investment best right out of the gate is the deal team. And so we're really helping to help them think through forecasting and building out weekly flash reports and budgeting and all that good stuff. And then skew rationalization analysis, ad hoc analysis, we're oftentimes just extra arms and legs for the DLT or for the leadership team at our portfolio companies, just get stuff done out of the gate. And then over time, our ops team plays a much more active role with those portfolio companies, but it transitions that way over time. Nick: Where is New Water at in its fundraising cycle? And what are you hearing from LPs this year that may differ from previous years? Matt: Yeah, great question. Fundraising, obviously, a hot topic across the private equity universe. So for New Water, we are winding down fund one. We've got three assets left in fund one. Two of those three are pretty mature. And so hopefully in the next handful of months here, those will be officially in market via sell side. And fund two is ramping up we probably got enough room and fun too to do a couple more investments platform investments and so I put two and two together we're we're kind of knocking the door for for raising funds that's that's super exciting for us. The market so what what we're hearing is that the current state of the fundraising market is not too different this year from where it was last year. So I'm sure you're well-tuned to just general deal flow. It has been slow for the past couple of years. That means capital is not being recycled very quickly, which means LPs don't have a lot of room for allocations. And so the dam kind of has to break at some point. I think everyone knows it's going to happen. It's a matter of when. And so if you are listening to what LPs are saying, it feels like 2025 is the year in which more allocations are expected. And so we certainly hope that that's the case. We know that the fundraising environment has been tough over the past couple of years. And so once the wheels start turning in a more normal fashion in the market, assets are trading hands, there's more deal activity, we think that that domino effect will lead to more fundraising opportunities for the property equity universe. Nick: Reflecting back on 2023, what were some of the market observations you had, maybe challenges you face, and then opportunities within 2023 that you found? Matt: So 2023, I just mentioned it a little bit. It definitely was slower deal activity. I think 2022 was slow. And the numbers will tell you that 2023 is even slower than 2022. So definitely not a flurry of deal activity. The deals that we did get done were interesting. A lot of assets had what we were calling noisy EBITDA. So in this kind of post-COVID world we're living in, a lot has happened. Think about labor shortages, shipping crises, semiconductor shortages, commodity prices ripping. And so you add all that together and that just creates, again, kind of a noisy environment to look at an asset super clean and to really understand what's a normal margin profile or a normal growth rate you can expect out of the business. Again, given all those noisy dynamics over the past couple of years. And so it just took a lot more work and a lot more negotiating with sellers to come to a compromise on what's practical, what's transactable, what can two sides agree upon. So noisiness on what did get done was definitely an overarching theme for us. That's tighter leverage, of course. I think everyone's been well aware of what the debt markets have done over the past couple of years. Obviously, higher spreads, higher rates on that debt leads to just lower valuations and tighter leverage overall. Not a lot of platform opportunities for us. Specifically, we were being much more stringent, maybe a bit of a tighter filter on what we wanted to transact on from a platform perspective. But we got a ton of that on top. So I think eight transactions we completed over the past 15 months or so, all strategic add-ons for our current portfolio. So definitely active, definitely a lot of work getting done. You know, quite frankly, not a ton on the new platform front. Nick: Got it. And now that we're into Q2, what are some of the trends you're seeing in 2024? Has anything carried over, at least in what you're seeing in your end of the market? Has anything surprised you yet? Matt: So if you would have asked me a month ago, I would have said no real change in 2023. But really over the past month, we've seen deal activity pick up a pretty good bit. Definitely not this watershed moment where all of a sudden, it's blow your doors off busy, but it's definitely busier. Pipeline's a little fuller. There's more opportunities out there. We're actually seeing a lot of carve-out opportunities. The reason for that,

In this episode of our Private Equity Spotlight series, life sciences and healthcare partners Carol Loepere and Nicole Aiken-Shaban discuss the new state laws requiring notices and consent from state regulatory authorities prior to completing healthcare transactions. ----more---- Transcript:  Intro: Hello and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content please contact our speakers. Carol: Welcome back to Dealmaker Insights. I'm Carol Loepere, a partner in Reed Smith's Healthcare and Life Sciences Group and I'm joined today with my partner Nicole Aiken-Shaban. We both help companies navigate regulatory considerations for deals in the health care space. Today, we're discussing recent enactment of state laws requiring notice and in some cases approval from state regulatory authorities prior to completing a health care transaction. These are notable as they are separate from long-standing laws regarding changes of ownership or CHOWS as they're often referred to at the state level, governing state licensure and certificate of need. And also they're different from federal laws governing health care transactions such as Hart- Scott-Redo and Medicare, Nicole. Why are we seeing these laws? What are they designed to achieve? Nicole: That's a great question, Carol. There are a number of different motivations and some states are focused on local concerns as a group. However, these laws broadly are meant to address a perceived gap in oversight for the majority of health care providers within a state that have not historically been subject to more intense certificate of need and or licensure processes. Uh think about hospitals and other hospices or entities like that. In that latter bucket, one question I have asked myself is why now as our listeners likely know, health care is a priority at the federal level right now with increased scrutiny on antitrust and anti competitive enforcement efforts, there's also a related effort to target private equity investment specifically in health care, both by federal agencies, Congress and also the press. Not surprisingly, that focus has trickled down to state legislative action when you take that focus and combine it with the proliferation of nontraditional providers that occurred during the pandemic. Just a couple of years ago, a number of states have started to look to exert more oversight over the provision of health care and who's providing it in their borders. Carol, what is a snapshot of the current landscape of these laws? Carol: As of April 2024 there are 14 states with health care transaction notice and or approval requirements. Some of these have been on the books a long time while others are brand new and some are just taking effect later this year. One of them is Indiana and we'll talk a little bit about that later. Importantly, though there is legislation pending in several other states including California, for example. So it's very important to check state law as well as pending legislation and regulations that are implementing these laws as you consider health care transactions in various states. Before we discuss a couple of examples of these laws, Nicole, are there certain characteristics or themes that people should keep in mind in reviewing these laws? Nicole: Yes, I know we are both a fan of lists and for our listeners, I've put together three key points to keep in mind when assessing these laws. First, they are very fact dependent. Many laws have threshold limits that define material transactions or the types of transactions and affiliations subject to the laws. They have varied effective dates, sometimes different effective dates within the same state based on the type of transaction. And there is specific language in those laws on their applicability to particular health care providers and entities in the space as well as obligations on those providers and their different types of notices. Second, definitions are key, not only are they fact dependent, but you have to understand what the definitions are for the law and to understand how it might apply to your facts. In a particular case, some state laws define health care entities subject to the law narrowly. Others are much broader. For example, in some states, the law is focused on health care providers, including even individual practitioners like physician groups and examples of those are Minnesota and Connecticut in other states, health care entities are even more broadly defined to include health insurers like in Indiana and California. And it's important to understand how they are defined in the particular state or states in which you are looking at doing a deal in order to know whether your deal may come within the purview of the particular law. Third on our list, some states have regulations or sub regulatory guidance that provides additional information on the application of the actual statutes and, and legislation such as Illinois is a good example. Washington has template notice forms that are available and the Attorney General's office is available to answer questions via email if you're not sure how to submit um a particular notice or have a question about applicability in other states regulations forms and FA Qs are or maybe forthcoming. A good example of that is New York where for now, um If you're doing a deal subject to the requirements in New York, you need to submit the notices based solely on what you the information provided in the legislation itself. Um but New York is planning to issue FAQs specific forms and additional information in the future. So it's important to really dig into that regulatory guidance and forms and FAQs where you have it, it's, it might add more color to what you need to provide in a particular notice how it should be submitted. And some of those logistics working through a deal. Let's take a deeper dive into a couple examples of some of these laws. Carol, why don't you get us started? Carol: Thanks Nicole. Let's start with Indiana. I mentioned it earlier. It's one of the more recent laws that was just passed and it becomes effective July 1 2024. So here we are in April. If the parties are well on their way to doing a deal, they may be able to get a deal done even before the law becomes effective. Um So that's possible. And as we talked about, it's important to look at the effective dates if not. And if you're in a transaction that may take place later this year in, in Indiana, it's important to take a look at this law to see if it might apply. So the law adds a new title entitled Reporting of Health Care Entity, Mergers and Acquisitions to the laws and essentially parties must provide notice to the Indiana Attorney General 90 days prior to closing. So it's a 90 day notice requirement. It's important to keep in mind for this one that it's really a notice only requirement. Um The attorney general does have the authority to review the information that's submitted it. The attorney general can request additional information about the transaction and also can issue a civil investigative demand and issue a written opinion about the transaction, the parties to the transaction and whether it implicates any antitrust concerns. And under the law, the attorney general is supposed to do that within 45 days of submitting the notice. However, at least on its face, the attorney general does not appear to have the authority to block the deal from going forward. So what's covered under this law? So as I mentioned, it's, it's a discussion of transactions involving a merger or acquisition of a quote, health care entity, end quote. And that, that's a defined term as we talked about. Very key to look at that and I'll come back to that in a minute about what is a health care entity, but it's a merger or acquisition of a health care entity having assets of at least $10 million. If that's a transaction in which the parties are involved, the 90 day notice trigger may apply. Uh The term acquisition is also very broadly defined in the law. It's defined as any agreement, arrangement or activity, the consummation of which results in a person acquiring directly or indirectly the control of another person. So this would cover for example, asset acquisitions, equity deals and so forth. It's very broad. I mentioned that the law uh applies to a quote health care entity and, and in this law, it's is defined very broadly to include providers, payers, PBMs and private equity companies, which as we've discussed has been a focus of many of these laws. So the term of a health care entity is in an organization or business that provides diagnostic, medical surgical, dental treatment, or rehabilitative care. So that's gonna cover a lot of different kinds of providers. It applies to an insurer that issues a policy of accidental and sickness insurance, a health maintenance organization, a pharmacy benefit manager or, and here again, the focus on private equity, a quote, private equity partnership, regardless of where the private equity partnership is located seeking to enter into a merger or acquisition with any of these entities. Again, very broad. And we see that focus again here while the law does cover insurers, not surprisingly, the term does not include Medicare or Medicaid program. And also our listeners will note that there's no reference in this law to pharmaceutical or medical device manufacturers. Otherwise it's hitting a broad range of uh parties in the in the health care continuum. So again, uh an example of a very broad law, the law um does include specific information for parties to include in their notice. And importantly includes that the information submitted must be kept confidential. And of course, this is often a very key concern for parties doing

With the recent explosion of antitrust developments in the United States, members of our Corporate and Antitrust & Competition teams have come together to produce a three-part series that discusses the practical impact of these developments for our clients. In this third and final episode, Reed Smith partners Anatoliy Rozental and Ed Schwartz team up to talk about merger planning during these times of uncertainty. ----more---- Transcript: Intro: Hello and welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content please contact our speakers. Anatoliy: Hi, everyone and welcome back to Reed Smith's podcast series, Dealmaker Insights. I'm Anatoliy Rozental, Private Equity M&A partner based in our New York office. With the explosion of developments in the U.S. antitrust space. I’ve teamed up with our antitrust and competition team to chair a three part series where we will be discussing the practical impact of recent developments and key priorities for our clients. Our third and final episode, I'm honored to be joined by my partner Ed Schwartz, who was a member of the global antitrust competition team and who is at the forefront of some of these antitrust battles. Ed, thank you so much for joining me today. Ed: It's a pleasure to be with you today. Anatoliy. Anatoliy: Thank you, Ed. So let's dive right in. We've all heard and read so much about the changes in antitrust enforcement under President Biden, especially when it comes to mergers. We've also heard that these changes have made it more difficult to get deals through both the DOJ and the FTC. So do merging parties really need to approach the merger enforcement process differently today than they did even four years ago? Ed: I think they do Anatoliy. Look, we all know that President Biden came into office with a mandate which I think can more accurately be described as a dictate from the progressive wing of the Democratic party to bolster antitrust enforcement, especially with regard to mergers and beginning with the appointment of Lina Khan to chair the FTC and the appointment of Jonathan Kanter at the antitrust division. We've seen the White House act on that mandate. And each of them Khan and Kanter has implemented changes at their respective agencies that have made getting many deals through the agencies more challenging. Now, the good news is that we have not seen a dramatic increase in the number of cases being investigated through a second request or being challenged in court. And that was expected by many of us. We've seen fewer in fact, particularly at the FTC. And there are a lot of reasons for that, that I don't really have time to get into, but still for parties who are trying to navigate the merger enforcement process deals that potentially raise anti-competitive concerns. And I'm talking about deals where there is a significant horizontal overlap between the parties or maybe because it's a vertical transaction which could be seen as potentially threatening to rivals of either the buyer or the seller. These parties do need to adjust their strategies for dealing with the antitrust agencies to adapt to the changes that we've seen. Anatoliy: So, what do you think are the biggest changes in merger enforcement that you've witnessed that are impacting parties today? They're trying to navigate the merger enforcement process? Ed: Well, it's a lot, but maybe I can speak first in broad strokes. Uh I think the changes made by the agencies fall into three broad categories. First, the agencies have broadened the scope of deals that the agencies consider to be potentially anti-competitive. Second, they've implemented changes that couldn't make getting a deal through more difficult and take longer if the agency decides to investigate. And three, the agencies have also made negotiating remedies for a challenge deal in order to win approval more difficult. Now, let me take those one at a time. So with respect to broadening the scope of deals, the agencies may find to be anti-competitive. Let's take a look at the recent revisions to the horizontal merger guidelines, which in a number of ways, they really both broaden the scope of deals that may be subject to investigation and a suit to block and at the same time, lowered the bar for merger challenges. So for example, and really importantly, the revised guidelines state that a proposed transaction will be viewed as presumptively unlawful if it results in a post merger combined fare of 30% that is a market share of 30% by the merge firm or in HHI of 1800. These are significantly lower thresholds than we saw in prior guidelines and they're really much lower than the thresholds the courts have generally viewed as raising anti-competitive concerns. So those are two examples both coming out of the revised horizontal merger guidelines. Um Second, though the agencies have now stated that a vertical merger will be viewed as presumptively illegal if either party has at least a 50% market share. This is new. And it's also consistent with the fact that we have seen notable challenges to vertical mergers in the last few years such as the FTC suit to block the aluminum rail transaction. And that by the way is a case that the FTC lost before the FTC administrative law judge. I think we also have to look beyond what the FTC has said in the revised horizontal merger guidelines because the FTC has issued other notable policy statements including a broad general statement of enforcement policy that addressed merger enforcement policy. And there the commission said that mergers that don't violate Clayton Act Section 7, which is the federal law establishing the standard for merger enforcement, could still violate Section 5 of the FTC Act. That's a radical statement. So what the FTC is saying is that even if under the body of case law that's developed over the last many, many, many decades and under FTC policy, a merger would be deemed to be legal that they still may challenge it under Section 5. The FTC has also said that it is abandon the consumer welfare standard in analyzing mergers even though this has been the touchstone for merger analysis for decades. Now because the FTC hasn't, hasn't provided much in the way of guidance as to just how they analyze deals. We're really left with the commission pretty much saying we can't really tell you what the standards are, but we'll know in anti-competitive merger when we see it and that's really not much of an exaggeration. So let me turn now to getting the deal through once an investigation has been opened. And what we're seeing there is more of a practice than a stated policy by the agency. The investigations that are launched are taking longer and the burdens on merging parties in navigating the investigation process is generally greater. So, put another way what we're seeing in many cases is the agencies using their discretion more often to be less flexible in negotiating the scope of second request and overall taking more time to conduct the investigation. And this of course, can imposed an enormous toll on the parties and in some cases threatened or even kill the deal. Lastly, remedies. Both the FTC and the Antitrust division have expressed deep skepticism about the effectiveness of merger remedies in fixing the problems they see arising from problematic mergers. This is also significant because if the agency isn't willing to negotiate a remedy, the only remaining options are to litigate or abandon the transaction. Anatoliy: So given all of that, how can merging parties adapt? What, what should they be doing differently today than they were doing four years ago? What, what are we supposed to be telling our clients? Ed: Well, that's really a $60,000 question, isn't it? And I would highlight three things. The first, I think parties need to take into account the risk of a long investigation. And I'm talking potentially as long as 18 or even 24 months in the parties' deal documents if you would think an investigation is likely. And I'll add that this is especially true if the deal may be investigated in other countries. In which case, the U.S. agency may slow roll the investigation even more. Also, given the greater risk, parties need to be especially thoughtful. And I think even creative in thinking about clearance risk allocation between the parties and possible outcomes when negotiating the deal documents. The second thing that I think parties need to focus on arises from the following reality and that is that the agencies hold most of the cards in a merger investigation. They really do. But there is one card that the parties can play and that is a willingness and ability to litigate. So what that means is that if an agency is jamming the deal up, the most effective thing the parties can do is to when they get to that point, certify substantial compliance with the second request. Now, the agency may say they don't agree. You haven't, you haven't complied. But the parties can say as far as we're concerned, we have complied. Tell them that, tell the agency that the parties plan to close and that they can sue if they want. But, that means the parties have to be prepared to litigate. And that what that means is that they should develop an effective litigation strategy early in the planning process. This is an important change, but it is the reality of navigating the merger clearance process today. Ultimately taking the dispute to a federal court means the agency has to prove its case under the enormous body of merger law that's developed and that's where the parties get leverage, even the threat of litigation and demonstrating a willingness to do it. That's what gives the party much greater leverage in an investigation. Importantly, here, remember the, if the ag

With the recent explosion of antitrust developments in the United States, members of our Corporate and Antitrust & Competition teams have come together to produce a three-part series that discusses the practical impact of these developments for our clients. In this episode, Reed Smith partners Anatoliy Rozental and Chris Brennan discuss new U.S. merger guidelines. ----more---- Transcript: Intro: Hello, welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content through this series, please contact our speakers.  Anatoliy: Hi, everyone and welcome back to Reed Smith's podcast series, Dealmaker Insights. I'm Anatoliy Rosental, private equity and M&A partner based in our New York office with the explosion of developments in the US antitrust space. I've teamed up with some of our antitrust and competition team to chair a three-part series where we'll be discussing the practical impact of recent developments and key priorities for some of our clients. For our second episode, I'm joined by Chris Brennan, who is a partner in Reed Smith's global antitrust  and competition team and whose practice is at the forefront of these antitrust battles. Chris, thank you so much for joining me today.  Chris: Thanks, Anatoliy. Always good to work with you and especially for today's discussion which focuses on a major development on how our clients evaluate and plan for merger clearance issues in the US.  Anatoliy: So let's, let's jump right in. You know, this episode is focused on the US Department of Justice and the Federal Trade Commission's 2023 merger guidelines. So to start at the beginning for our listeners who may not be familiar with the history, you know, I understand that the first guidelines were issued way back in 1968 and there have been several iterations since then. The 2023 guidelines consolidate, revise, replace the various versions of the merger guidelines issued by the FTC and DOJ. And can you give us a brief background of what these guidelines represent?  Chris: So, the stated purpose of these guidelines is to help the public business leaders, practitioners that would be you and I and courts understand how the agencies consider certain issues when investigating mergers. The ideas is that they reflect the agency's current approach to merger enforcement and provide you and me and the larger community insights into how those mergers are going to be analyzed at least for the current agency leadership. And just so we're all on the same page. US law requires companies to file a notification that's known as an HSR filing to the FTC and DOJ for a proposed merger that at least for this year in 2024 is valued at or above 119.5 million. Once that filing is submitted, the agencies have 30 days to decide if they want to further investigate and potentially challenge the merger and critically the parties cannot close the deal while that process is playing out. So while these guidelines are non binding, you should think of them as the playbook for DOJ and FTC personnel that review those filings and that playbook is how agency leadership expects them to analyze a merger during the 30 day review period, and whether to let that deal close or to pump the brakes and investigate further.  Anatoliy: Got it. So are the 2023 guidelines, another incremental change or is this something more groundbreaking?  Chris: So it's definitely groundbreaking, but potentially not in the normal sense of that phrase. The agencies have touted these guidelines as necessary to address quote unquote the modern economy. Yet many of the legal authorities that the agencies rely on for significant changes in these guidelines are based on pre 1980’s case law and many of those authorities have been ignored or rejected by courts over the last 40 years as modern economic theory has shifted our view of how mergers affect markets and outcomes for market participants. Critics of these new guidelines have noted that there's an obvious tension between claiming to update the guidelines for a modern economy while seeming to adopt the pre economics era of antitrust enforcement. But if you take a step back, that approach makes perfect sense, if you think about the Biden administration's view of today's modern economy, and they've characterized that as one marked by excessive corporate consolidation and a need for enhanced merger enforcement. Consistent with that view, these 2023 merger guidelines clearly signal an appetite for stronger enforcement, more theories of potential harm to competition and likely longer investigation periods for our clients.  Anatoliy: Ok. So in light of this new approach, can you walk our listeners through the major changes and how the DOJ and FTC are analyzing mergers for potential competition concerns?  Chris: Sure, I should be clear that there's a lot in these guidelines but for purposes of today's episode and for our listeners, I want to talk about three of the most widely applicable changes. First, the guidelines significantly lower the threshold that agencies use to assess whether a merger is presumptively anti competitive. Generally, a merger that creates a firm with a market share of greater than 30% is likely presumed to be an anti competitive under these new guidelines. And so these guidelines are going to make an entirely greater class of mergers presumptively anti competitive. The guidelines also substantially reduce the presumption thresholds for the Herfindahl–Hirschman Index which is known as the HHI index which analyzes the change in concentration of market shares across all the competitors in a relevant market. I don't want to get too deep into the numbers of that analysis, but one way to think about it is that these revisions place far greater scrutiny on what we call a 6 to 5 merger where you start with six competitors, there's a merger and now you're left with five. Before these guidelines, those mergers were less likely to raise anti competitive concerns. And certainly under this new approach, anything more concentrated such as a 5 to 4 merger is absolutely gonna trip the new guidelines. I should note that this is a rebuttable presumption. And the agency has made clear in the final version of these guidelines that it's a rebuttable presumption, but they're saying it's rebuttable while at the same time saying you're gonna need really good arguments to get over that presumption. And if you're in a significantly higher market share above 30% or substantially below the thresholds for the HHI index, that's really gonna be an uphill battle. You're gonna have to fight really hard and potentially go to the courts if you wanna push that deal through. So second, I wanna talk about vertical mergers and obviously by that, I mean, a merger that's not between direct competitors, but something like a merger between a supplier and a manufacturer. The guidelines now suggest, don't declare but suggest the presumption against mergers in which there's going to be a market share of 50% or greater in the related product. And that's the product by which you could use to foreclose other rivals access to the market. This is an area where the agencies are clearly departing from case law because there's never been a presumption that a 50% share would make a merger unlawful. And I think they're gonna have a really tough time pushing that through the courts. And it'll be interesting to see how much they try to push those cases and challenge those mergers uh to test this new approach. Third and finally, I wanna talk about deals that involve nascent or com or potential competitors. And this includes both actual potential competition where one of the merging parties has real plans to enter a market as well as perceived potential competition where current competitors are disciplined by a perception that one or more of the merging parties could enter the market. The guidelines claim that and I'm quoting here in general expansion into a concentrated market via internal growth rather than via acquisition benefits competition. In other words, they don't want you to see, they don't want to see a entity buy its way into a market. They wanna see it build its way into the market. And we've seen this theory in the fintech space, in virtual reality. It's particularly applicable to emerging technologies and I'm sure we'll see it in acquisitions related to artificial intelligence. My view is these challenges are gonna rise and fall on the specific facts and players and that's consistent with the agency's mixed record in challenging these deals to date.  Anatoliy: Generally sounds like scrutiny is increasing across the board. But are there any potential industries or types of entities that are specifically targeted in these new merger guidelines?  Chris: There are and we should begin with a shout out to your first episode with my colleague Michelle Mantine because private equity is definitely in the crosshairs of these new guidelines. And I know you and her talked about that issue in detail. So if you're listening and that's applicable to your world, then please go back and check out that episode. Let's also talk about two other subgroups and that's platforms and labor markets. A multi sided platform is defined as a product or service in which participants provide or use distinct products which contribute to the attractiveness and use of the platform overall. Just for some examples, think about companies offering digital services like app stores, buyer and seller platforms and social media companies. The agencies make clear that the guidelines will apply even if the competitive concerns do not arise on all sides of the proposed market. And they'll consider competition between platforms, competition on the platform, and competition

In our latest Private Equity Spotlight series, Brian Murchie, senior client development advisor at Reed Smith, is joined by Rush Harvey, Director, Private Capital Advisory at Raymond James, to discuss the unique perspective Rush and his team bring to the market, and the state of the fundraising and secondary markets. ----more---- Transcript:  Intro: Hello, welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content through this series please contact our speakers. Brian: Welcome back to Dealmaker Insights. Excited with the new series spotlighting the private equity industry. My name is Brian Murchie. I'm the Client Development Advisor at Reed Smith. My personal background is I started out at Platinum Equity on the business development team for seven years. From there, I moved into in an investment banking role. I was with Stifel in a West Coast sponsored coverage role. And then from there, I moved over to Raymond James also as a managing director in a sponsor coverage role and excited for Rush Harvey, who's a good friend of mine and a, and a, and a former colleague at Raymond James, who's in a private capital advisory side. I think he brings a very unique perspective given where he sits in the market and the state of the market. So welcome rush and excited to have you on here How are you doing, Rush: Brian I'm doing awesome. Thanks so much for having me today. Brian: Great. I think you bring a very interesting perspective. Rush just given your background and kind of where you sit in the market. Could you discuss your transition from being a former LP to to the private capital advisory side? Rush: Sure, thanks Brian. It's been a journey that's for sure. I was a limited partner my entire career up to joining Raymond James on the private capital advisory side about two years ago, most recently managing the endowment with the team at Kansas State University Foundation and then at the Texas A & M University Foundation. So go cats and gig em’  Aggies. And it's been a great transition to the private capital advisory side to bring an LP perspective to how we do business, how we serve our clients and ultimately how we try to be a source of relevant deal flow to limited partners. Brian: and Rush I, I did notice you have a recent article out there that you published. Uh could you kind of  discuss that? Like I know it discusses, you know, your background and kind of your entrance into the private capital advisory space. But if there's anything there you could touch on, it would be helpful. Rush: Yeah. Happy to Brian and, and thank you for reading. I appreciate that. The title of the article is Reflections From the middle seat. So in, in the current role we are serving GPs, sponsors and also limited partners, LPs. And so we want to be as helpful as possible to both. And, you know, sitting in the middle seat on the airplane usually isn't the most fun, depending on who you sit next to. But in the current role, I'm having tons of fun because the market needs support in regards to fundraising. It's such a tough fundraising market right now. So GPS need a partner to help them navigate and we're trying to be a good partner in the market. But limited partners, they need good deals and they wanna work with folks, they trust and you gotta earn their trust. So sitting in between LPs and GPs, I have a pretty unique perspective. You know, being an LP understanding the hard work it takes to execute a process to get a deal done, to find the right partner to help you serve your institution, to enhance your mission. For me at two public land grant university cities. The mission was so important, thinking about those kids that we served and the scholarship dollars we tried to generate and making those private capital commitments really, really mattered and we had to have good partners. So trying to be a source of those types of great deals for those limited partners and then helping GPs, you know, tell their story in a way that resonates with those limited partners. And you know, the best private capital advisory firms play that role in the middle seat, but then they get out of the way when it makes sense and, and you let the LP and the GP build that relationship and, and stay as active as you can to be a good partner to help them ultimately build that relationship more formally. So, it's been fun. Brian: Thanks Rush. That's uh a wonderful insight here. And I, I think that's a good segue into kind of the state of, of the fundraising market. Could you just kind of touch on, you know, like the current state of the fundraising market and how this year is a little different than last year over how it might face a lot of the same uh challenges. Rush: For sure. To say it's tough would be a massive understatement. Limited partners just don't have the capital to deploy like they did a few years ago, you had public markets really underperform a few years ago, which makes allocations to privates go up, which means you have less budget for capital deployment. And so with the public markets being volatile, budgets got tight and they're still tight because private markets have continued to perform. But now you have public markets coming back. So what we're trying to help our partners understand is you've got to play the long game, you've got to expect to be in market longer. And there are a few boxes you have to check for limited partners given how tough it is from a capital deployment standpoint for them, the boxes that you have to check. So deals are getting done, capital is being raised, but it's taking much longer for funds to reach their target. And it's really been a biased mark in regards to fundraising, the bigger funds, those raising 10 billion and above have seen a lot more success than those groups raising 10 billion and below. That could be a flight to quality for LPs. It could be working with managers where they have longer lasting relationships as well in the more mid and large cap part of the market. Some of the data doesn't tell you exactly why LPs are favoring larger funds. But you've seen capital flow there in a much bigger way than in your past. That is what we're seeing. But at the same time, it's still tough for everyone outside of a few larger names. Brain: Yeah. Thanks Rush. Yeah, I know. It's tough out there. I mean, in your seat, have you seen a fund that has historically had, you know, a good size fund, let's say they raised 650 million and, you know, they've been trying to raise, you know, another fund and can't, can't quite get to 650 but, you know, they can raise 500 so they're able to raise a smaller fund and, and they've said, ok, you know, let's just raise, you know, like a smaller fund on our next one and we'll deploy this app write some larger checks and then, you know, we'll go back to market in a couple of years when, you know, like the fundraising market might be a little different? Rush: Sponsors in that situation are taking what they can get. So if they can't get to their former fun size, there is that conversation of, hey, let's get to a third number and go execute our process. I do think LPs in the future will look at a down fund with a little more grace than they would have in the past raising a smaller fund. Or it being significantly less than what you tried to raise was an absolute negative for most folks because you're trying to raise more capital. You've hired more people, you wanna do more deals and you don't get there just a bad sign in the market. But given how tough it is now, if it was 650 you raise 550 for the next one and you can help folks understand why. Hey, we had a strong re-up from our current LP base. Hey, we did bring in some new LPs. We saw the writing on the wall with the market. We didn't want to be in market 18 months. We want to execute our process. We want to put money to work because this could be our best fund ever and come back later to your point when things are more normalized. I do think most LPS will understand that. But also if it is a smaller fun explaining to the market, why you don't have to let people go, why you can still execute, why the pipeline is still going to be robust, et cetera. But that example, 650 to 550 isn't that material but say it was 650 then you raise 300 then you're hoping to go get a bunch of co-invest to do similar size deals, but you haven't done a lot of co-invest in the past. That's something LPs are really, you know, trying to avoid. So there is grace in the market, but you wanna make sure you can get as close to your target as possible. And that's where we're seeing a lot of demand for our services because we can come in and help tell that story, connect them with the right pools of capital. I want to see those types of opportunities to help them get to that part to help them get to that target. Wearing the old LP hat comes in handy here because I was always concerned about, hey, are you raising too much capital? And if you're increasing your fund size by 20% or 100% why, why can you execute the process? Why is it still reputable? Why is it still relevant? And so we're asking those same questions as a placement agent partner to ensure that we can get LPs interested in the mandate and answering the fund size question because it's usually the top five question that LPs want to understand when they look at a new mandate. Brian: Got it. No, that's very helpful. Thanks, Rush. And could you kind of give us, you know, like a state of uh the uh the secondary market and how it compares to last year? You know, I know, you know, continuation vehicles had certainly been increased over the last, you know, a year or so. So just, just kind of curious your, your thoughts on that and the the current state of the market with

With the recent explosion of antitrust developments in the United States, members of our Corporate and Antitrust & Competition teams have come together to produce a three-part series that discusses the impact of these developments for our clients. In this first episode, Anatoliy Rozental, a private equity partner in the firm’s Global Corporate Group, is joined by Michelle Mantine, chair of our global Antitrust & Competition team, to talk about recent developments at the intersection of private equity and antitrust law. ----more---- Transcript: Intro: Hello, welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content through this series please contact our speakers.  Anatoliy: Hi, everyone and welcome back to Dealmaker Insights. I'm Anatoliy Rozental, private equity and M&A partner based in our New York office uh with the explosion of developments in the US Antitrust space. I've teamed up with our antitrust and competition team to chair a three part series where we'll be discussing the practical impact of recent developments and key priorities for our clients. For our first episode, I honored to be joined by my partner Michelle Mantine, who chairs our global antitrust and competition team and who is at the forefront of some of these antitrust models. So, let's dig right in, we are here to talk about recent developments at the intersection of private equity and antitrust law. What is happening that makes this conversation so important?  Michelle: Well, this month alone, the federal agencies that enforce the antitrust laws signaled an intensified look into the purported financialization of health care markets. Citing concerns regarding health care consolidation and private equities role in the marketplace. Specifically on March 5th, regulators hosted a public workshop, private capital, public Impact an FTC workshop on private equity and health care. And during that workshop, the agencies announced a cross government inquiry into the impact of private equity investment and other forms of what they refer to as corporate greed in the health care sector. Speakers from the agencies touted enforcers recent enhanced scrutinizing of private equity firms and their involvement in health care. The workshop featured remarks from agency officials as well as panels of economists, academics and health care workers. Now across the board, the speakers denounced private equity’s role in health care leaving little room for discussion of the possible benefits, clinical or otherwise of private capital investments in the health care market. Now that very same day, just before that workshop began, the agencies issued a request for information or RFI looking for information regarding consolidation in health care markets. Again, citing concerns that acquisitions in this space may generate profits for private equity firms at the expense of patient care and worker safety. As the Federal Trade Commission's chair, Lina Khan, expressly noted private equity companies should be on notice of these efforts by the antitrust agencies specifically that the agencies are on the lookout for strategies and things that they see that could be problematic under the antitrust laws. They're focused on, in their words, protecting the American public from anti competitive and unlawful tactics.  Anatoliy: Certainly worrying for some of my um private equity clients in this space, aside from Lina Khan and the FTC, what other agencies are involved and how are they going to work together to, to regulate private equity firms?  Michelle: Yeah, beyond Lina Khan and the FTC, the antitrust division of the Department of Justice, the DOJ is really uh sort of alongside the FTC spearheading this effort. Now, both of those agencies, the FTC and DOJ are in charge of enforcing the federal antitrust laws, generally. In this particular effort, those agencies were joined by the Department of Health and Human Services, HHS, with support from the Center for Medicare and Medicaid Services, CMS. HHS is charged with protecting the health of American citizens while CMS works within HHS to administer government funded health care through the Medicare and Medicaid programs. Now, the FTC has undoubtedly focused on private equities involvement in health care. As of late, you know, they instituted a civil suit against a private equity investor, Welsh Carson and its portfolio company US Anesthesia Partners challenging its serial acquisitions with which the FTC alleges allowed the firm to monopolize the market at issue in that case. Now, corporate involvement in health care has been a consistent priority for this administration and it will likely continue well beyond this workshop. The DOJ also has plans to investigate for this discussion on March 5th, whether private equity investments in health care entities violate state corporate practice of medicine. CPOM laws. Now, HHS has a slightly different focus. It plans to focus its efforts more on monetary transparency and accountability regarding the use of government funds. Similarly, CMS plans to implement additional oversight into ownership of healthcare entities by exploring stronger standards to oversee the quality and execution of Medicare and Medicaid programs. Now, these agencies have agreed upon information sharing between and among them allowing information gathered by one agency to be used in potential investigations by the other agencies. Beyond these agencies, state regulators have been taking on similar cases under the state antitrust laws, scrutinizing investing and challenging private equity transactions in this space. In addition to proposing their own state legislation that will make it more challenging for private equity companies to engage in transactions purely in health care, but also beyond state antitrust rules are also becoming increasingly common as a method for inquiring against these types of actions. So for example, the Colorado Attorney General just settled lawsuits against the entity I named earlier Us Anesthesia Partners requiring that group which is private equity backed to sever exclusive contracts with five hospitals and dissolve any of its doctors non-compete agreements. Similarly, the Massachusetts Attorney General imposed conditions on a hospital acquisition by a private equity owned firm within the last few years. Multiple states have implemented transaction notification statutes that are often referred to as baby HSR statutes which are requiring transactions within the health care sector or ones involving hospitals or insurers to report transactions to state authorities before closing it. So it's really critical that, you know, the state players are factored into overall legal risk analysis and evaluation and assessment of transactions.  Anatoliy: Michelle. We're, we're talking a lot about health care. It does this mean that our PE clients that are not investing in the PE space don't have to be concerned about additional antitrust scrutiny from the government?  Michelle: It's a great question and I told you the short answer is no. While the examples you are seeing right now are focused on health care, it goes beyond that and the agencies have taken the opportunity to say that in the March 5th discussion and otherwise in their commentary. So just for a few examples, if you look back in August of 2022 the FTC challenged a private equities firms acquisition in the veterinary services space albeit health care adjacent, right? That challenge was settled. But though the parties are subject to numerous limitations on future acquisitions including prior approval and notice requirements on any purchase of their specialty or emergency veterinarian clinics within certain geographic areas. Similarly, alongside of these sort of changes and discussions on private equity and antitrust in June of 2023 the FTC announced upcoming changes to the information that will be required for merger control notifications under the Hart-Scott Rodindo Act. These proposed changes include requiring significantly more information regarding minority investors, officer director, relationships, board advisors, as well as a broader scope of internal documents to be submitted with the HSR filings. Private equity buyers will be particularly impacted by these requests for more information assuming that these proposed rules become final, particularly the information request seeking information about disclosure prior acquisitions that occurred within the past 10 years. That's quite a long time. Now, alongside those proposed HSR changes in July of 2023. The FTC and DOJ had released draft merger guidelines which were finalized in December of 2023. And those guidelines call for heightened scrutiny of private equity activity across all industries not just limited to health care. The guidelines expressly note that the agencies will investigate broad strategies of serial acquisitions even if no single acquisition on its own would substantially lessen competition or tend to create a monopoly. In addition, the guidelines note that the agencies will consider how minority interests may impact competitive decision making suggesting that that might even expand as far as non voting minority interests. Now last but not least in November of 2022, the FTC issued a policy statement describing the types of conduct that it considers to be an unfair method of competition even if that conduct does not violate the traditional antitrust laws such as the Sherman Act and the Clayton Act. The policy statement defines roll up transactions specifically as a series of transactions that tend to bring about harms that the antitrust laws were designed to prevent but individually may not have violated the antitrust laws. Now, since that time, the rel

In the first of our Private Equity Spotlight series, Brian Murchie, senior client development advisor at Reed Smith, welcomes Chris Baddon, a principal and the head of business development at Pacific Avenue Capital, to discuss trends in the private equity industry in 2023 and what to look forward to this year. ----more---- Transcript: Intro: Hello, welcome to Dealmaker Insights, a podcast brought to you by Reed Smith's corporate and finance lawyers from around the globe. In this podcast series, we explore the various legal and financial issues impacting your deals. Should you have any questions on any of the content through this series please contact our speakers.  Brian: Welcome back to Dealmaker Insights. We are excited with a new series spotlighting the private equity industry. My name is Brian Murchie. I'm the client development advisor at Reed Smith. Excited to welcome our first guest, Chris Badden with Pacific Avenue Capital. I'm personally excited to welcome Chris, given I have a background like his. I spent seven years on the business development team with Platinum Equity. And then from there, I went into a sponsor coverage role with Stifel and then Raymond James. So, you know, welcome Chris, excited to have you and looking forward to your insights here with our podcast.  Chris: Thanks, Brian. Look, I really appreciate you having us on and, and uh looking forward to the discussion today. Personal background on myself, local kid in Southern California. So I grew up in, in Orange County in Huntington Beach specifically, I found my way to, to USD for college down in San Diego. And uh actually got some private equity experience during a college internship with JMI Equity. They're a software and tech focused private equity firm down in, down in San Diego. And I came up to LA for my first role professionally with Open Gate Capital uh back in 2010, which certainly exposed me to the industry. And I started as a, as an entry level uh business development associate. Most of my coverage was specifically uh industrial focused and chemicals and building products and source a number of platforms for, for the firm. There was there for about 7.5 years, went to Transom Capital for three years and help them build out the business development approach and then came here to Pacific about 2.5 years ago, almost three years ago now uh to lead the business development effort uh for Pacific Avenue.  Brian: Thanks Chris. So what would you say were your biggest challenges in 2023? And kind of how do you see these evolving in the year ahead?  Chris: Yeah, it's a really good question and, and maybe um maybe I'll start with just a quick background and an overview on Pacific as a firm that will help kind of segue into how we look at the world and and how we think about opportunity sets within the, the M&A environment and, and you know, just raising our first fund here. So, so Pacific Avenue was founded uh about seven years ago. Now, our founder, Chris Sznewajs um came out of The Gores Group. We have two other partners, uh Jason Lee, who came out of Platinum Equity and Sun Capital and, and James Oh who joined us recently, uh who came out of Transom and worked at uh Gores with uh with Chris. So, you know, we were founded on the premise that a lot of the, you know, firms that we, we all came from, you know, have moved up market uh when, when they look at these corporate divestiture and carve out opportunities and, and there's sort of a, a void or a hole for people with experience and, and credibility and understanding how to navigate these sorts of transactions in, in the lower middle market. So, you know, we were very successful as a pre fund firm. We, we did a number of transactions, you know, four different carve outs here and, and, and a few and one found a roll up opportunity prior to raising our first uh institutional capital pool and we did that successfully last year. So in, in, in 2023 our, our fund closed officially uh just over 500 million and, and we, we raised the capital to really specialize in, in a few types of transactions. So the first being, corporate divestiture is certainly our, our number one bucket. Um and then businesses with unnatural ownership and, and what that means to us is, is carve outs are, are obviously somewhat self explanatory and, and, and we're buying businesses from, from larger organizations and, and uh fixing them operationally uh to, to end up returning capital to our investors. And we, we specialize in, in a number of categories, but we're, we're generalist um overall from an industry threshold and perspective. So we, we love industrials, um you know, business services, healthcare, consumer tech, broadly defined to name some of the larger sectors. But we're really, we're really more transaction focused than we are subsector experts. So we like deals and, and sit that we think we can be good partners for the Corporates in, in separating these businesses with our, our senior team. We, we've done over uh over 40 carve outs as, as a senior team here. So there are very few things that we haven't seen from transaction dynamic perspectives. And we, when we raise our first fund, we, we have two platforms already closed in the fund. One is a uh chemicals carve out that we bought from TotalEnergies uh that close uh in ’23 and we bought uh an ingredient processor from SunOpta uh as well in the, in the food and beverage space. So, uh we're based in, in Los Angeles. So most of the team sits there. We have a few folks that one sits in, in Dallas and two in Florida. But the, the majority of the team sits out of the L A office and uh we are growing very fast to keep up with uh internal demand and expectations on, on our side.  Brian: Thanks Chris for that. That's great to hear. And congrats on all the success you guys have had. Uh there, it's been, you know, it's been fun to watch you guys really grow. So, you know, with that being said, you know, what were some bright spots or specific trends that kind of excites you going into this year in 2024?  Chris: Yeah, absolutely. And, and I'll, I'll, I'll address the challenges question as well. And I know we, we got to that at the end there. But, you know, I think in, in ’23 some of the challenges we face were similar to most funds that are looking to deploy capital is, is navigating a, a difficult financing market to get transactions closed. Um You know, we found that uh timeline to get deals closed was taking much longer than in previous years. And, and we tend to focus in a lot of complex and, and challenged uh corporate carve out situations that have, have a ton of moving pieces and, and they tend to, to take longer than, than they used to. You know, for, for us, you know, one of the challenges we didn't have was, was overall deal flow. You know, the market was, was down certainly across the board. And I think it obviously is relative to the types of transactions, each firm uh is independently looking at from either a sponsor back transaction perspective or um something like us where we spend more time in, in corporate carve outs. But we were actually up just over 30% in, in do year, over year uh compared to ’22. So we had, we had a good, good volume of opportunities on a regular basis.  Brian: Wow, that's great.  Chris: Yeah, it was. And I think that, you know, the market shifted, you know, towards us for sure. Uh the complexity in the, in the financing markets obviously kept a lot of, you know, normal regular way, private equity backed transactions on, on the sidelines that, you know, certainly as we'll get to, I think we see an expectation to pick up in ’24. But for us, you know, that led to a lot of complex situations and, and we find that, you know, the carve out market itself, it, it doesn't, it doesn't ebb and flow from a volume perspective as, as much as, as some other categories, but it shifts more from an industry perspective. So, you know, in certain years, we'll see a ton of auto or chemicals or packaging type transactions. And then a year later, we'll see, you know, food and bev and, and oil and gas services and it seems to, to flow more from an industry threshold than it does uh a specific volume or, or ebb and flow based on the the market dynamics. But, you know, we, we think um for ’24 that, that there's a lot of bright spots. So as mentioned, you know, we raised a new fund. Um so we have plenty of available capital to put into, to new transaction opportunities that we're very excited about. And we're two deals into the fund already. You know, we also have a large co-invest program with our LPs and, and what that allows us to do and when we raise the fund is target, a larger and more sizable transactions and that may be perceived that we can, can complete out out of a $500 million fund. So we punch above our weight, I think from a sourcing perspective and we like deals that are, you know, large and complex from a general thesis and scale is, is really important to us when we look at the, the new set of opportunities that we can go target. Uh you know, how do we, how do we build this? So we, we built this strategically from a sourcing model perspective. So we, we have what we call a dual source coverage model internally Pacific. And what that means to us is we cover the uh corporations directly from a carve out perspective. And also the, you know, all the advisors, the middle market advisors, the bulge brackets and down to the boutique boutique advisors as well. So, you know, in a perfect world. We have uh relationships with one or one or the other party that allow us not to miss a transaction. So, you know, we cover over 2000 public companies. Um We split our business development team up amongst sectors. So we have one individual. Uh Drew Nicoletti who's covering the industrial sphere for us. We another one named Eugene Kim who covers health care, business services, tech and consumer and, and they are regularl

Partner LiLing Poh and associate Aimee Khuong discuss best practices for early-stage companies in maintaining legal housekeeping to better prepare them for future rounds of financings; the overall diligence process and what companies and investors should expect; issues that typically arise during the diligence process based on our experience representing both company-side and investor-side; and next steps to keep in mind once a term sheet is finalized.