At first, the decision of an investment professional or team to spin out from a PE firm could be perceived as reflecting tension between the two parties. PE spinouts are an emerging trend, observed Goodwin partner Brynn Peltz. “Sometimes they work out well and the existing firm is actually seeding the new firm. And sometimes they’re hostile and a team is going to a competitor organization,” she stated. But the bottom line is that they are common, as illustrated by the experience of her colleague who advises clients on spinouts and is “very, very busy.” A running theme of PE spinouts is a principal’s desire for much greater operational independence at a certain stage of their career, argued Goodwin partner Ranan Well. “It is common to see principals who decide that they want to ‘be their own person’ and who really want to form their own fund, and think they have either the track record or the recognition to do that,” he observed.
Read the Private Equity Law Report article for more.