managing-tender-offer-processes

# Managing Tender Offer Processes

## When To Use

- A GP or third-party buyer is launching a tender offer for LP interests in a fund
- An LP portfolio manager needs to evaluate and respond to an incoming tender offer
- A secondaries advisor is coordinating election mechanics and proration across multiple LPs
- A GP-led continuation or strip-sale requires structured LP election and rollover/cash-out processing

## Inputs To Gather

- **Offer documents**: Tender offer memorandum, purchase agreement (or term sheet), and any side letters modifying transfer rights
- **Fund governing documents**: LPA provisions on transfer restrictions, ROFR/consent requirements, minimum commitment thresholds, and anti-embarrassment clauses
- **LP roster data**: Current capital account balances, unfunded commitments, NAV as of reference date, contact details for each LP and their counsel
- **Pricing terms**: Offered price as percentage of NAV, reference NAV date, any price adjustment mechanisms (true-up, interim distribution credits)
- **Election structure**: Cash-out vs. rollover options, partial tender allowances, minimum/maximum tender amounts per LP
- **Timeline**: Offer launch date, election deadline, withdrawal rights window, expected closing date, any extension provisions
- **Regulatory and tax considerations**: ERISA LP percentage, tax-exempt investor constraints, UBTI concerns, foreign LP withholding requirements [VERIFY jurisdiction-specific rules]

## Workflow

1. **Map transfer mechanics against the LPA**
   - Confirm GP consent requirements and whether consent has been pre-arranged
   - Identify ROFR holders and determine if ROFR has been waived or must be run
   - Check for tag-along/drag-along triggers based on aggregate tender size
   - Flag any LP-specific side letter provisions affecting transferability

2. **Structure election options and proration rules**
   - Define cash-out and rollover alternatives with clear economic terms for each
   - Set minimum and maximum tender amounts; determine whether partial elections are permitted
   - Draft proration methodology: pro rata by tendered amount, priority tiers (e.g., small LPs first), or lottery [VERIFY if LPA prescribes method]
   - Address treatment of unfunded commitments — whether buyer assumes them, they are reduced, or they remain with the seller

3. **Prepare and distribute offer materials**
   - Draft tender offer memorandum with pricing, timeline, election form, and risk factors
   - Include election/transmittal letter with clear instructions and deadline
   - Distribute to all eligible LPs with confirmation of receipt tracking
   - Coordinate Q&A process — designate a single point of contact for LP inquiries

4. **Manage election period**
   - Track election submissions against the LP roster in real time
   - Confirm each election form is properly executed and complete (signatures, amounts, selected option)
   - Monitor aggregate tender volume against any cap; flag proration trigger points early
   - Process any withdrawal requests within the permitted withdrawal window
   - Send reminder notices at defined intervals before the election deadline

5. **Run proration and finalize allocations**
   - Apply proration formula once the election deadline closes
   - Notify each LP of their final accepted tender amount and selected option
   - Prepare allocation schedule showing pre- and post-transaction ownership percentages
   - Circulate revised capital account statements reflecting the transfer

6. **Execute transfer documentation and closing**
   - Draft and circulate transfer agreements (assignment and assumption of LP interest)
   - Obtain GP consent letters and any required ROFR waiver confirmations
   - Coordinate escrow funding and release mechanics for purchase price
   - Process amended Schedule of Partners and deliver to fund administrator
   - File any required regulatory notices (Form D amendments, blue sky filings) [VERIFY applicable filing requirements]

7. **Post-closing reconciliation**
   - Confirm capital account rebalancing on fund administrator books
   - Reconcile interim distributions between reference date and closing — apply true-up payments
   - Distribute final closing confirmation to all participating LPs and buyer(s)
   - Archive complete transaction record: elections, proration schedules, transfer docs, consent letters

## Output

- **Tender Offer Tracker**: Real-time dashboard of LP elections received, pending, and withdrawn, with aggregate tender volume and proration status
- **Proration Schedule**: Final allocation table showing each LP's tendered amount, accepted amount, and proration factor applied
- **Transfer Documentation Package**: Executed assignment agreements, GP consent letters, ROFR waivers, and amended partnership schedule
- **Closing Memorandum**: Summary of transaction terms, timeline of key events, final pricing, aggregate participation rate, and post-closing capital structure

## Quality Checks

- Every LP on the roster has been contacted and either submitted an election or confirmed non-participation
- Election forms are validated for completeness: correct entity name, authorized signatory, amount within permitted range, option clearly selected
- Proration math ties out — total accepted tender equals the lesser of aggregate elections and offer cap
- Transfer documents match the economic terms in the offer memorandum (price, adjustment mechanics, assumed obligations)
- GP consent and ROFR compliance are documented before any transfer is executed
- Interim distribution true-up calculations reconcile to fund administrator records
- All deadlines (election, withdrawal, closing) were met or properly extended per offer terms
- ERISA and tax-exempt investor thresholds are re-checked post-transaction to confirm the fund remains in compliance [VERIFY plan asset regulation limits]