Who the client is
Counsel to a portfolio company represents the company, acting through its board and officers, rather than the sponsor or any individual executive. The interests usually line up, but not always: management equity, executive departures, related-party fees, and a future sale can each put the company, its managers, and its sponsor in different positions. Knowing when a manager should have separate counsel avoids awkward conflicts later. Boards with sponsor-appointed directors also raise questions about information sharing and duties to minority holders. Engagement terms should state this in writing so that everyone understands whom counsel answers to. Setting these lines at the start keeps the relationship workable.
Running under a credit agreement and a value plan
Leveraged portfolio companies operate under credit agreements with covenants that limit acquisitions, debt, distributions, and asset sales, so many routine decisions need a covenant check. Sponsors usually expect add-on acquisitions, which require diligence, purchase agreements, and integration on a tight timetable. Employment agreements, equity incentive plans, and restrictive covenants for key employees need to fit the sponsor's plan and the law of the states where people work. Commercial contracts, regulatory compliance, and disputes continue as before, but with closer reporting to the board. Gather the closing documents from the acquisition, the credit agreement, and the equity plan so counsel knows the framework.
Setting up the working relationship
In a first meeting we review the ownership structure, the governance documents, and the sponsor's priorities for the next phase. We discuss how requests will flow, who can authorize legal work, and how costs will be reported, since sponsors often watch legal spend closely. We also identify open issues inherited from before the acquisition, such as pending disputes or compliance gaps, and decide which need attention first. When an exit eventually comes, a company with clean records and documented decisions is easier to sell. Private equity portfolio company counsel is most useful when brought in early enough to build that record.
