Minority Investor Rights in Private Equity Transactions

Abstract

In private equity transactions that involve multiple equity investors, negotiating interinvestor rights is important—and can be contentious. Those negotiations may pit the investor holding a controlling interest in the investment against minority equity investors. While the controlling investor seeks to enhance and monetize the value of its control, minority investors strive to obtain an alignment of the interests among the controlling and noncontrolling investors. The tension between the controlling investor's interest in monetizing its control, and the minority investors' desire to align all parties' interests, is played out in the negotiations over a number of provisions in a typical shareholders' agreement.