On the minds of in-house lawyers

As private equity firms battle to stay abreast of the latest regulatory, ESG and dealmaking changes, PEI asks senior lawyers from Cinven, Triton and Nordic Capital how their roles are changing.

How has the role of the in-house lawyer changed over the last 12-24 months?

Babett Carrier
General counsel, Cinven
Henrik Johansson,
General counsel, Nordic Capital
Daisy Raven
General counsel, Triton Partners

Babett Carrier: The areas that in-house counsel get involved with have continuously grown over the last two years and the way we work has changed. At the onset of the pandemic, we helped assess the impact of covid and lockdowns, in particular on our portfolio. But we also had to learn how to work efficiently in a virtual – and now hybrid – environment, while staying connected with the rest of the business, but also as a team.

The last 24 months have also seen an increased focus on ESG – during the pre-investment assessment and due diligence of ESG matters, working with the portfolio companies as part of our ESG programme, or spending time on the implementation of new sustainability regulation. And then we had to deal with changes that had quite a fundamental impact on our industry, such as the end of the Brexit transition period.

Henrik Johansson: There has been “more of everything” during the last two years: increased dealflow and fundraising, increased focus on portfolio companies during covid, and most recently due to Russia’s invasion of Ukraine and new trade sanctions, as well as an increasing flow of new regulations. To remain an effective partner to the business, it is critical for the in-house function to have a scalable operating model and deploy resources where they add most value, finding the right balance between immediate and long-term value add.

Daisy Raven: Like all professional service providers, we have had to adapt to the new virtual environment. This has meant maintaining good communication both within the legal team and with our business partners, despite working from different locations. Fortunately for us at Triton, we already had strong digital infrastructure in place before covid.

There have also been a lot of legal, tax and regulatory changes over the last two years. This has meant more work preparing for changes, as well as increased complexity of live transactions.

What pressure points do you expect to encounter this year?

BC: One of the biggest challenges continues to be how to efficiently manage and prioritise the various competing demands on our time, while ensuring the wellbeing of the team. In-house legal teams at PE firms tend to be quite lean, and it is important that the growth of the legal team keeps pace with the growth of the overall firm.

HJ: Our main challenge will not be any single legal issue, but ensuring we stay ahead of the curve despite the high levels of deal activity coupled with the pace of legislative change. That said, we remain particularly focused on ESG, European and US regulatory proposals, and longer-term tax-related developments.

DR: It’s clear that cybersecurity and data protection is rapidly rising up the policy agenda, and we have to expect material regulatory change in the coming years. We have also seen an increased focus on culture governance, with more of a focus at both the portfolio company and sponsor level.

What issues are currently taking up most of in-house lawyers’ time?

BC: We typically divide our time between deal execution, fundraising, the portfolio and firm matters, depending on the needs of the business. Over the last 24 months, deal activity has been extremely busy and we are spending a lot of time on deal execution. Deals are becoming more complex – whether it is a carve-out from a strategic, take-privates, or co-investments.

In addition, the last 24 months have seen the implementation of new foreign direct investment regimes across the world. This means investments often require many more regulatory filings.

HJ: Rather than spending too much time on any specific legal issues, our main focus is to further develop and deploy our infrastructure across the different areas, making sure we work in a scalable and proactive way. However, we do spend more time on high-complexity transactions, fundraising and regulatory matters.

DR: Within a fast-growing firm such as Triton, we are always actively looking to bolster our in-house resource in anticipation of increased deal and fundraising activity. Across the industry, it seems many law firms and external advisers are stretched for capacity, and so we have pre-empted the need to grow and have focused our efforts on hiring top talent.

How are recent and upcoming regulatory changes affecting the way you advise your firm?

BC: Many of the recent regulatory changes are about corporate responsibility and the role the financial sector can play in tackling the issues that affect society today. As responsible investors, these considerations naturally flow into corporate decision-making at our firms.

It is no longer sufficient to give advice solely based on the black letter of the law. Rather, in-house counsel is expected to help the business consider the right course of action, taking into account the interests of customers, employees and society at large.

HJ: Given the long-term nature of PE, we work proactively to “see around the corners”. This is becoming increasingly difficult given the number of regulatory initiatives. Limited guidance on how the regulations apply to PE is also unhelpful. This makes it difficult to provide clear advice on compliance without unnecessarily restricting business operations. On the plus side, it allows us to add value to companies (by designing products to meet or exceed current ESG principles) rather than merely being about risk control.

DR: We have invested significant time and resource preparing our business for these regulatory changes, including through firm-wide presentations and specialist training. We expanded our regulatory horizon mapping – now a standing item at our management meetings.

Specifically on ESG, while regulations may increase risk and complexity, we also see this as providing significant opportunities for our business from an investment and value creation perspective.