Structuring Co-Investments In Private Equity: Collaborating For Success

We continue to see an upward trend in private equity funds ("PE Funds") utilizing co-investments. When properly structured, co-investment transactions can yield a number of benefits for co-investors and PE Fund sponsors alike.

Co-investments in private equity are joint investments made by two or more investors, typically including a PE Fund sponsor and one or more limited partners. Each co-investor will directly participate in the equity financing of a particular target portfolio company (the "Portco") alongside the PE Fund, as opposed to investing via the PE Fund itself. In doing so, co-investors can potentially gain greater exposure to a specific investment and increase their potential returns, while the PE Fund sponsor benefits from reduced capital requirements and potential access to additional investment opportunities. Typically, the PE Fund and co-investors will invest in a holding company (a "Holding Company") that acquires the Portco, but the Holding