Private Equity Tip: Small Details Can Have a Big Impact

Small Details Can Have a Big Impact When Buying Private Companies


Once a private company has been discovered and proper due diligence has taken place, it is important for investors to consider the following small details before closing the deal:

  • Tag Along and Drag Along Rights - Involves the presence of a majority shareholder and a minority shareholder. When a majority shareholder is selling their stake in the company, tag along rights give the minority shareholder the ability to participate in the sale as well. In comparison, a drag along right also occurs upon sale from a majority shareholder, but in this instance, the majority shareholder can force the minority shareholder to sell their stake in the company
  • Control - Investors in a company may have varying levels of control amongst themselves. Certain investors may push for multiple board seats to increase their level of control. Companies can also issue multiple classes of shares that have different voting rights, and thus have varying levels of control that way