In private equity parlance, a co-investment is a minority equity investment made directly in a portfolio company by a private equity fund investor alongside, but not through, the private equity fund in which the investor is a limited partner. Many private equity fund investors view co-investments as an attractive addition to their investment strategy. To take advantage of these benefits, the investor and sponsor must structure the co-investment with consideration toward tax efficiency, governance control, transparency, and cost control.
Practical Law has published two Practice Notes that discuss the considerations that go into deciding whether to make, and how to optimally structure, a co-investment.
Why the appropriate structure is crucial to a successful co-investment.
What the investor should consider in structuring a co-investment transaction.
The most common types of co-investment structures, with a description of their advantages and disadvantages for investors and sponsors.
Less common structural options for making a co-investment.
Other concerns that may arise when structuring a co-investment, such as use of blockers and when investors invest at different levels of the co-investment structure.
These Practice Notes assume that the underlying investment is a buyout of a private company—the most common type of private equity investment and the most common transaction type for co-investments. For a discussion of buyout transactions, see Practice Note, Buyouts: Overview.