Introduction

In this chapter, we will look at some of the issues faced by the private equity investors and the managers during the lifetime of the investee company. In particular, we will look at issues related to the ongoing funding of the business, underperformance of the investment, parting company with a manager, and restructurings including debt capitalisation. These are challenges in all markets, but have become ever more pressing in the market conditions prevailing from 2008 onwards.

Such matters put to the test the mechanisms included in the documentation at the time of the buyout, and afford the opportunity to see how theory and practice combine to protect the interests of both the company and the investors. The implications of employment law, the relationships between the investors, the management team and the senior lenders, the taxation aspects of any changes to the deal structure and the overriding objective to protect and, where possible, enhance the value of the investment must all be considered. Such factors operate to set the environment in which often challenging business decisions must be made and implemented under tight commercial time pressure.

We will also examine directors' duties and, in particular, the new statutory code relating to directors' duties in the Companies Act 2006. Conflicts of interest can be particularly acute given the various agendas of the parties to the investment, and their different roles and responsibilities.