{"id":272,"date":"2023-03-16T05:36:39","date_gmt":"2023-03-16T05:36:39","guid":{"rendered":"https:\/\/www.dealsplus.io\/blog\/?p=272"},"modified":"2023-06-12T08:13:12","modified_gmt":"2023-06-12T08:13:12","slug":"private-equity-portfolio-cap-tables-before-and-after-dealsplus","status":"publish","type":"post","link":"https:\/\/www.dealsplus.io\/blog\/private-equity-portfolio-cap-tables-before-and-after-dealsplus\/","title":{"rendered":"Private equity portfolio cap tables before and after DealsPlus"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"272\" class=\"elementor elementor-272\" data-elementor-settings=\"{&quot;ha_cmc_init_switcher&quot;:&quot;no&quot;}\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-33154be elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"33154be\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-9bcd419\" data-id=\"9bcd419\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-dc7e2f1 elementor-widget elementor-widget-text-editor\" data-id=\"dc7e2f1\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Management incentives in European PE deals are typically structured as \u201csweet equity\u201d. A standard European private equity portfolio capital structure consists of the following components:<\/p><ul><li>the private equity sponsor (and any rollover Management shareholders) invest into a strip of loan notes and\/or preference shares with a fixed interest of 8% to 12% and common shares often referred to as \u201cStrip\u201d.\u00a0<\/li><li>in addition, a pool of common equity is carved out for the management team for \u201csweet equity\u201d.\u00a0<\/li><\/ul><p>In such a structure, the common equity will have a low\/nominal value and the bulk of the value is in the loan notes and preference shares.\u00a0<\/p><p>By its very nature &#8211; multiple instruments, numerous holders, and constant changes over time due to leavers, joiners, issuances, buybacks, reorg\u00a0etc &#8211; these structures are difficult to administer.<\/p><p>In addition, accurate data and documentation need to be maintained on: a) interest accruals on the loan notes and preference shares; b) legal documents for each capital structure event; c) up-to-date ownership registers; d) tax election filings to maintain the tax treatment of the sweet equity; and, e) cap table data for GP&#8217; portfolio valuation.<\/p><p>At\u00a0<a href=\"https:\/\/www.linkedin.com\/company\/dealsplus\/\">DealsPlus<\/a>\u00a0we know this pain and the risks of getting things wrong. That\u2019s why we have built an end-to-end solution to simplify private equity cap table management for both Portfolio teams and GPs.\u00a0<\/p><p>In this table, we summarise the management of private equity portfolio cap tables before and after DealsPlus.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7419024 elementor-widget elementor-widget-text-editor\" data-id=\"7419024\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<table><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\">\u00a0<\/td><td class=\"has-text-align-left\" data-align=\"left\"><strong>Before DealsPlus<\/strong><\/td><td><strong>After DealsPlus<\/strong><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>Cap table tracking<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><br \/>Users must undertake multiple fragmented activities to manage private equity cap tables.<br \/><br \/>Time, cost and error rates are high.\u00a0<\/td><td>Users just log cap table events once in DealsPlus and it does the rest.\u00a0<br \/><br \/>Users benefit from reduced time and cost, and increased accuracy. \u00a0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>Share registers<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><br \/><br \/>Users must maintain share registers for legal ownership purposes.\u00a0<br \/><br \/>These only capture movement in equity instruments and are not fit for use cases other than to meet the company law requirement. \u00a0<br \/><br \/><\/td><td><br \/>DealsPlus auto generates the share registers from its central capital register database that captures all instruments &#8211; debt &amp; equity.\u00a0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>Portfolio valuations<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><br \/>Users must maintain an excel spreadsheet for portfolio valuation purposes that captures both debt and equity instruments, including interest schedules.\u00a0<br \/><br \/>These are cumbersome to maintain, particularly as cap tables change during the holding period.\u00a0<br \/><br \/>They can often go wrong and end up being costly.\u00a0<\/td><td><br \/>DealsPlus auto generates your commercial cap tables required for portfolio valuations.\u00a0<br \/><br \/>It can show you the cap table position for any date (past or present) and with accrued interest on debt and equity instruments.<br \/><br \/>Further, the new feature to be released soon allows users to embed portfolio waterfall models within DealsPlus, making valuations seamless. Value each instrument by holder for any date.\u00a0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>Legal document generation<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><br \/><br \/>Users must generate and maintain the legal documents that gave effect to the capital structure separately.\u00a0<br \/><br \/>There exists a risk of legal documents not matching the registers or commercial cap tables.\u00a0<\/td><td><br \/><br \/>Legal documents can be generated with information in DealsPlus, and tagged with each capital register entry, making a future review straightforward.<br \/><br \/>DealsPlus acts as your \u2018single source of truth\u2019 across capital structure logs and underlying documents. \u00a0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><br \/><strong>Structure charts<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><br \/><br \/>Group structure charts must be manually updated for changes to legal entities and ownerships percentage as cap tables change.\u00a0<\/td><td><br \/><br \/>DealsPlus automatically generates and updates the group structure chart as ownerships change.\u00a0Moreover, DealsPlus\u2019 group structure charts are interactive, allowing easy access to underlying information.\u00a0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>Multi-layer cap tables<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><br \/><br \/><br \/>Private equity portfolio structures have multiple legal entities. Further, it is possible that external investors are invested at different levels.\u00a0<br \/><br \/>It is difficult to capture the cap tables across multiple legal entity levels.\u00a0<br \/><br \/><\/td><td>DealsPlus maintains your capital structure across all entities in a group.\u00a0<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>The result<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><strong>Portfolios were not \u2018transaction ready\u2019<\/strong><\/td><td><strong>Portfolios are \u2018transaction ready\u2019<\/strong><\/td><\/tr><\/tbody><\/table>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Management incentives in European PE deals are typically structured as \u201csweet equity\u201d. A standard European private equity portfolio capital structure consists of the following components: the private equity sponsor (and any rollover Management shareholders) invest into a strip of loan notes and\/or preference shares with a fixed interest of 8% to 12% and common shares [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":273,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-equity"],"_links":{"self":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts\/272","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/comments?post=272"}],"version-history":[{"count":4,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts\/272\/revisions"}],"predecessor-version":[{"id":277,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/posts\/272\/revisions\/277"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/media\/273"}],"wp:attachment":[{"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/media?parent=272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/categories?post=272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dealsplus.io\/blog\/wp-json\/wp\/v2\/tags?post=272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}