1107007 Informal Interpretation

Date

July 28, 2011

Rule

801.1(d)(2)

Staff

Michael Verne

Response/Comments

1) Correct 2) Agree 3) Having the contractual authority to make acquisition decisions is enough even if it doesn't have the authority to make disposition decisions

Original Image File (116.13 KB)

Question

From: (Redacted)
Sent: Wednesday, July 27,2011 2:48PM
To: Verne,B. Michael
Cc: (Redacted)
Subject: Inquiry Regarding Associates

Hi,Mike-

Wewould like to confirm the associate analysis with respect to the followingstructure commonly used by our private equity clients:

FundsA, B, X, and Yare their own UPEs. Funds A and B have the same general partner(GP) that is a limited partnership (LP) and that is its own UPE (the A/B GP).Funds X and Y have the same GP that is an LP and that is its own UPE (the X/YGP). Each of A/B GP and X/Y GP, in turn, has a GP that is an LLC andthat is its own UPE (A/B LLC and X/Y LLC, respectively). The investmentdecisions regarding Funds A and B are made by the investment committee of A/BLLC (A/B investment committee). The investment decisions regarding Funds X andYare made by the investment committee of X/Y LLC (X/Y investmentcommittee). Each of the investment committees is composed ofindividuals/natural persons. None of the individuals/natural persons hascontractual authority to manage investments --their authority comes from theorganizational documents of the respective LLC. There is significant overlap inthe two investment committees.

Assume that 50% or more of the individuals/natural persons that serve on the A/B investment committee and the X/Y investment committee are the same. Are we correct that only Fund A, Fund B, the A/B GP, and the A/B LLC are considered associates for purposes of an HSR filing made by Fund A as an acquiring person?

In addition, would you please confirm our understanding that a third party manager with the contractual authority to make investment decisions with respect to only the disposition of investments

If a third party manager has only the contractual authority to make decisions with respect to the acquisition of investments (and not the disposition of investments) would it be considered to be an associate of the entity whose investment decisions it manages?

Asalways, many thanks for your guidance!

1107007 Informal Interpretation

Question

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