February 16, 2022
The new rules around side letters, will make it harder for new private equity firms to emerge. It's always hard for any new company to get it's start and these side letter agreements, often help a private equity firm attract a few initial investors. Once a firm has a few names behind them, then it's easier to attract other investors. Your rules will make it harder for new firms to offer a lot of additional flexibility, as these early investors may get very good deals to sign up and if other investors know about those deals, they will insist on the same, which might ultimately ruin any hope for a viable business. I get the intention here, but please understand these rules actively work to limit flexibility. People always go for the established so as a new company, one needs to cut deals, get things going and this is just another rope. Please if my point is not being made, please please call me. I fear you will do a lot of harm with this provision.