lev-os Managing Co Investment Processes
When To Use
- GP identifies a deal where the equity check exceeds fund concentration limits or reserved co-invest capacity exists
- LP requests or standing co-investment program requires formal offering documentation
- Structuring co-invest vehicle terms (SPV, sidecar, or direct) for a specific transaction
- Tracking allocation decisions, acceptance/decline status, and funding timelines across multiple LPs
- Preparing post-closing co-investment reporting or reconciling co-invest economics with the main fund
Inputs To Gather
- Deal details: target company name, sector, transaction type (buyout, growth, venture), total enterprise value, equity check size, and anticipated close date
- Fund parameters: fund co-investment policy, concentration limits, GP commit percentage, carry/fee structure on co-invest
- LP eligibility list: LPs with co-investment rights (contractual or discretionary), historical participation rates, minimum/maximum ticket sizes, and any MFN or priority provisions from side letters
- Term parameters: management fee (if any), carried interest, hurdle rate, GP clawback, expense pass-through, and any reduced economics for co-investors
- Vehicle structure: SPV formation jurisdiction, tax blocker needs, parallel fund considerations, and regulatory constraints (ERISA, BHCA, foreign investment restrictions) [VERIFY]
- Timeline: offering notice deadline, election period, funding date, and any regulatory filing windows
Workflow
Screen the deal for co-invest eligibility
- Confirm the investment exceeds fund allocation policy thresholds or that discretionary co-invest capacity exists
- Check LPA provisions for GP discretion on co-investment offerings and any LP consent requirements
- Identify conflicts of interest (e.g., offering to affiliated vehicles, GP principal co-invest vs. LP co-invest)
Determine allocation methodology
- Apply contractual co-invest rights first (side letter commitments, MFN beneficiaries)
- For discretionary allocations, apply the fund's stated methodology: pro rata to commitments, rotational, strategic relationship-based, or speed-of-response
- Document the rationale for each allocation decision, including any LPs passed over and why
Structure the co-invest vehicle and terms
- Select vehicle type: direct investment alongside the fund, SPV/sidecar with single-asset economics, or blocker structure for tax-exempt/foreign investors [VERIFY jurisdiction-specific entity choices]
- Set economic terms: no-fee/no-carry, reduced fee/carry, or full economics — note deviation from main fund terms
- Draft or adapt co-investment agreement, subscription documents, and side letter provisions
- Address governance: board seats, information rights, transfer restrictions, tag/drag provisions, and follow-on rights
Execute LP communication and offering
- Distribute co-investment opportunity notice with deal summary, term sheet, allocation amount, and election deadline
- Include confidentiality reminder and material non-public information (MNPI) acknowledgment
- Track LP responses: accept, decline, request modification, or no response
- Handle oversubscription or undersubscription — reallocate per methodology and document adjustments
Manage funding and closing
- Issue capital call notices with wire instructions and funding deadlines
- Coordinate with legal counsel on closing conditions, regulatory approvals, and signing mechanics
- Confirm receipt of funds and execute closing documents
- Update the fund's cap table and LP portal with co-investment positions
Post-closing administration and reporting
- Provide co-investors with closing confirmation, final allocation amounts, and vehicle formation documents
- Establish ongoing reporting cadence: quarterly NAV statements, annual audited financials, K-1s or equivalent tax documents [VERIFY based on vehicle jurisdiction]
- Track co-investment performance separately from main fund for attribution and track record reporting
- Monitor follow-on investment rights and pro rata participation obligations
Output
- Co-Investment Offering Memo: deal summary, investment thesis excerpt, allocation rationale, and term sheet
- Allocation Schedule: LP-by-LP table showing eligibility basis, offered amount, accepted amount, and status
- Term Summary: side-by-side comparison of main fund terms vs. co-invest vehicle terms (fees, carry, governance)
- LP Communication Log: timestamped record of notices sent, responses received, and follow-up actions
- Funding Tracker: capital call amounts, wire confirmation status, and outstanding balances by LP
- Post-Closing Summary: final cap table for co-invest vehicle, total co-invest as percentage of deal equity, and reporting obligations
Quality Checks
- Verify all contractual co-investment rights from side letters are honored before discretionary allocations
- Confirm allocation methodology is consistently applied and deviations are documented with rationale
- Ensure co-invest vehicle terms do not inadvertently create MFN triggers for other LPs in the main fund
- Cross-check total co-invest commitments plus fund commitment against total equity check — no over-allocation
- Validate that MNPI handling procedures are followed in all LP communications
- Confirm regulatory considerations are addressed: ERISA plan asset rules, BHCA thresholds for bank-affiliated LPs, CFIUS implications for foreign co-investors [VERIFY applicable regulations]
- Ensure tax structure is reviewed for pass-through treatment, withholding obligations, and blocker entity requirements [VERIFY with tax counsel]