1202004 Informal Interpretation

From:

(Redacted)

Sent:

Thursday, February 09, 2012 4:50 PM

To:

Verne, B. Michael

Subject:

Associates question

Hi Mike,

I would like to confirmmy understanding regarding the associates analysis for a Newco, which will beits own UPE, acquiring a target.

Two PE fund groups, GroupA and Group B, will invest in a Newco which will in turn acquire the target.Assume that the investments will be made by a handful of LPs from each of GroupA and Group B. Assume that each LP is its own UPE but all Group A funds aremanaged by the same GP A and all Group funds are managed by the same GP B. (Inthis case, if one LP A were the UPE of Newco, GP A would clearly be anassociate). The Group A and Group B funds, in the aggregate, will each invest50/50. The Newco will be set up as either a corporation or LLC but, ineither case, there will be a board (or board-like entity) and neither Group Anor Group B will have the right to appoint 50% or more of the board. Decisionsof the board, including further investment decisions of Newco, willrequire approval of at least one director designated by each of Group A andGroup B.

Your opinion belowsuggests that, in such a case, Newco would have no associates.

http://www.ftc.govlbc/hsr/informal/opinions/1107008.htm

Do you agree?

From:

(Redacted)

Sent:

Thursday, July 28, 2011 2:20 PM

To:

Verne, B. Michael

Subject:

Associates Questions

Hi Mr. Verne,

I participated in the Ropesweb-discussion (which was very helpful) and I have a couple of follow upquestions:

1. I asked this question on the Q&A, but didn't feelthat it was completely understood, so I would appreciate your thoughts on it-one fund holds 49% of Company X; an Associate (another sister fund) also holds2% of Company X. If NAICS overlap exists with respect to Company X and thetarget/seller, do you disclose under Item 6 (c)(ii) (J think, per theinstructions, it would be "none"), Item 7(a) (per the instructions,again "none"), Item 7(b)(ii) and 7(d) (per the instructions, I think"none" -I would think a less than 5% holding of an Associate wouldnot be an Associate, so, would not be subject to these items). If this is thecase, no disclosure of 50%+ holding would result (no different than the oldform), nor will there be any disclosure of the Associate's holdings (sinceunder 5%) in the Acquiring Fund's identical holdings (only the Acquiring Fund'sdisclosure under 6(c)(i), setting forth a noncontrolling 49% interest -so, noadditional disclosure of the 2% holdings results). Is this correct -or do weneed to disclose somewhere that the Sponsor holds a controlling interest ofCompany X via multiple sister funds?

2. I was confused about the Club Holding Corp. discussion(that the new form results in greater disclosure of the Club member sponsorsholdings) -if there is no Sponsor acquiring more than 50% in the aggregate (viamultiple sister funds) (Le., 30% Sponsor X, 40% Sponsor V, 30% Sponsor Z) -I amnot sure that there would be any more disclosure than under the old form (Le.,just the item 6(b) information, which existed in the old form). In addition, ina 50/50 deal (with a lot of sister funds for each Sponsor), I guess theimportant question is whether the new Club Holding Corp. has an investmentmanager (to go down to the Associates of the investment manager). If that isthe case, I suppose you could have 2 Sponsors with sister funds aggregating to50%, without the requirement of disclosure of control in subsequent HSR filingsfor a non-investment managing Sponsor, even if it has 50% (i.e., 2 Sponsors, 50/50(when taking into account the multiple sister funds each has), with onlyone (or none) of the Sponsor being the investment manager). Also, what if thereis no "investment manager" - the Club Holding Corp. has 1 directoreach appointed by the 2 sponsors, but with no investment manager contract.

I would appreciate yourthoughts on these two questions.