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Exclusive Q&A on Private Equity with Sally Penrose

Posted: 21st October 2016 08:18
Have There Been Any Recent Regulatory Changes Or Interesting Developments?

Bermuda as a jurisdiction is highly responsive to evolving market demands and over the past 18 months key stakeholders, including the government, the financial services regulator (the Bermuda Monetary Authority) and investment industry professionals have collaborated to make legislative changes that serve to cement Bermuda’s position as a premier offshore jurisdiction for private equity. One of the most interesting changes from a private equity perspective given the increased demand by investors for transparency and the global focus on management oversight has been the clarification of safe-harbour provisions for limited partners. The limited partnership agreement can provide for the establishment of boards and committees, and it is important to note that subject to any express provision in the limited partnership agreement, a limited partner that acts in that capacity does not owe a fiduciary duty in exercising rights or authorities under the partnership agreement to any partner, including any other limited partner. 

How Can Social Media Be Utilised For Sourcing Deals And Raising Capital?

Use of social media in capital raising is gaining traction. One way in which Bermuda has responded to this trend is by tabling the Personal Information Protection Act in July 2016. The bill is intended to provide a bespoke privacy framework for the protection of personal information in both online and offline environments. This framework both adheres to recognised international standards for privacy protection and recognises Bermuda’s growing digital market and unique regulatory environment. The draft legislation takes into account recent global privacy developments, including the EU General Data Protection Regulation and the EU-US Privacy Shield and will form a critical component of the jurisdiction’s developing cybersecurity laws.

When Thinking About Due Diligence Associated With M&A, Which Areas Are The Most Important For Your Organisation?

Being able to implement and co-ordinate a robust legal due diligence process is essential when assessing and negotiating a transaction. Whilst the target of a private equity transaction might be domiciled in Bermuda, its assets are frequently located outside of the jurisdiction. Therefore the ability to co-ordinate cross-border legal due diligence is key to our clients and they value our firm’s ability to manage the due diligence process from our 10 jurisdictions across the globe.
Whilst the scope and focus of the legal diligence of a Bermuda target will of course vary on a transaction by transaction basis, one of the fundamental areas to include is a detailed review of the corporate structure and governance of the target group. 

Which Markets And Industries Are Currently Proving Most Popular?

The majority of the private equity funds established in Bermuda have fund managers which are located globally. Market trends in Bermuda track major onshore markets and in particular we see mirroring of investment strategies of the US, Europe and Asia fund managers. In terms of companies which are incorporated in Bermuda as targets for PE investment, there are no industry specific regulatory issues which would limit a Bermuda company being a potential target for a PE firm. 

Can You Talk Us Through The Different Exit Strategies In Private Equity Transactions?

The three most common exit strategies which we see are an initial public offering (IPO) a secondary buy-out and a trade sale. Whilst PE-backed IPOs had their second strongest year in 2015 with 161 companies brought to market (according to Bain’s Global Private Equity Report 2016) investors often pursue more than one exit strategy simultaneously to ensure they can take advantage of favourable market conditions to maximise return on their investment. 

What Key Trends Do You Expect To See Over The Coming Year And In An Ideal World What Would You Like To See Implemented Or Changed?

“Shadow capital” investments such as co-investment and direct investment has seen growth in recent years, and we anticipate this will remain a strong trend in 2016/17. In particular co-investing alongside a GP is continuing to grow in popularity with LPs and we have seen a gradual upswing in Bermuda with co-investors utilising Bermuda special purpose vehicle with separate classes of shares to facilitate transactions with multiple co-investors.
We also expect the global trend towards increased transparency and regulation to continue. Bermuda has been very responsive to this increasing regulation, for example we expect a new bribery act to be introduced within the next year. This act, modelled on the UK Bribery Act 2010 would provide a modern and comprehensive scheme of bribery offences, in order to allow investigators, prosecutors and the courts to tackle bribery effectively whether committed in Bermuda or overseas.
In an ideal world, the European Securities and Markets Authority would return to Bermuda in early 2017 to assess Bermuda for its eligibility to be extended the Alternative Investment Fund Managers Directive Passport. Such recognition would enable the managers of Bermuda funds to market their funds and services throughout Europe without the need to undergo further approvals in each member state. Bermuda is dedicated to working together with ESMA to show that it is deserving of such recognition.

Sally Penrose is a senior associate and member of the Corporate department in Appleby´s Bermuda office. Sally specialises in the structuring, management and operation  of investment funds, including hedge funds, private equity vehicles, partnerships, closed ended funds and master and feeder structures.

Sally also has wide corporate experience acting for corporates and management teams on multi-jurisdictional mergers, joint ventures and acquisitions. Prior to arriving in Bermuda, her experience included working as a senior associate at DLA Piper UK LLP.

Sally can be contacted on +1 441 298 3286 or by email at

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