http://www.feld.com/wp/archives/2005/12/term-sheets-contentious-issues-and-lawyers.html Tue, 14 Feb 2012 01:23:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://www.feld.com/wp/archives/2005/12/term-sheets-contentious-issues-and-lawyers.html/comment-page-1#comment-1899 Jason Tue, 13 Dec 2005 21:28:26 +0000 http://www.feld.com/wp/?p=721#comment-1899 It's really a "free for all" when it comes to reworking deals. If you can imagine it, it's happened. I've not seen anyone very eager to rework their deals and normalize preferences, because at this point there is a finite pool of capital people are arguing about. Your comment that the Series A should get the biggest return due to biggest risk is well taken, but unfortunately not how the business goes. What you see are larger money / bigger players / institutions / strategic investors come in later, call the shots and demand the preferences go their way. I've never seen a deal where the Series A gets anything better than pari passu on preferences and this is very rare, especially these days. It’s really a “free for all” when it comes to reworking deals. If you can imagine it, it’s happened. I’ve not seen anyone very eager to rework their deals and normalize preferences, because at this point there is a finite pool of capital people are arguing about. Your comment that the Series A should get the biggest return due to biggest risk is well taken, but unfortunately not how the business goes. What you see are larger money / bigger players / institutions / strategic investors come in later, call the shots and demand the preferences go their way. I’ve never seen a deal where the Series A gets anything better than pari passu on preferences and this is very rare, especially these days.

]]> http://www.feld.com/wp/archives/2005/12/term-sheets-contentious-issues-and-lawyers.html/comment-page-1#comment-1898 Marcelo Calbucci Tue, 13 Dec 2005 17:21:43 +0000 http://www.feld.com/wp/?p=721#comment-1898 In regards to #1, I always wondered if the company got as far as a Series D, wouldn't be on the interest of all participants to simplify everything by "normalizing" preferences on previous deal? This is, would A/B/C investors be willing to re-work their deals and making A/B/C identical in terms of liquidation preferences? The other thing that is also very puzzling, is that each new Series has higher liquidation preferences than the previous one. This is unnatural -- the biggest risk taker (Series A) should be the biggest winner. Maybe I'm incorrect in that some deals do reflect the natural order of things. In regards to #1, I always wondered if the company got as far as a Series D, wouldn’t be on the interest of all participants to simplify everything by “normalizing” preferences on previous deal? This is, would A/B/C investors be willing to re-work their deals and making A/B/C identical in terms of liquidation preferences?
The other thing that is also very puzzling, is that each new Series has higher liquidation preferences than the previous one. This is unnatural — the biggest risk taker (Series A) should be the biggest winner.
Maybe I’m incorrect in that some deals do reflect the natural order of things.

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