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Addleshaw Goddard: Best Law Firm – Fund Structuring

A buoyant private equity market has powered the growth of Addleshaw Goddard’s transactional practice, as the focus on ESG came further to the fore and cross-border deal activity also experienced significant uplift. 

“ESG firmly took centre stage in 2021. This has been driven by the increased “mainstreaming” of impact funds and B corp certified GPs,” says Jan Gruter, partner in AG’s Investment Management group, “The increased focus on ESG has come from a number of angles: LPs, the workforce in GPs pushing for change and of course the regulators with a myriad of ESG related regulatory changes coming online, most notably the EU SFDR in March 2021.” 

The firm has seen this strongly reflected in its funds practice. The transition to “net zero” has underpinned strong fund-raising activity for green infrastructure funds and renewables focussed funds – and AG has advised on mandates in this space raising between GBP100 million to GBP500 million plus. 

However, in spite of the growing activity in this space, Gruter warns: “The transition to net zero will not be painless. It is important that GPs and LPs do not overlook societal impact and inclusivity to ensure it’s a just transition, securing worker’s rights and creating new opportunities for employment.” 

He also highlights the mounting regulatory complexity GPs and LPs are having to grapple with: “GPs and LPs are navigating an ever more intricate web of regulations. This is particularly true when it comes to ESG regulation, owing to the fact that it is still evolving with standardisation and reporting more advanced on environmental matters than on social matters. 

“There is also a risk that adding too many layers of regulation will restrain innovation and efficiency – making it ever harder to actually apply regulations in practice.” 

In response, GPs and LPs should cooperate to navigate this challenging landscape. The industry should also engage constructively with policymakers – highlighting the positive role that private equity plays in channelling private capital towards long term investing, creating positive social and environmental impacts. Put simply, the days when private equity was private are gone. The industry should embrace the drive towards transparency. 

In AG’s view, deal and fundraising activity look set to remain high in the coming year. “We have seen a large number of funds already in or coming to the market this year.  In terms of deals, there appears to be dry powder in the market which will result in sustained levels of investments and exits. 

“Of course, there will be other factors at play, such as rising inflation, interest rates and supply chain issues, the precise effect of which remains to be seen, as well as a much more uncertain geopolitical outlook and the lingering risk of new covid variants,” Gruter outlines. 

From its perspective, the firm aims to continue building its international profile and innovating in the ESG space by providing new tools and advisory services. AG will be making significant investment in its systems and developing AI to help clients make legal spend efficiencies and do more for less.  

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