Macfarlanes forms LLP for spun-off HSBC Private Equity

Macfarlanes has secured a foothold in gaining upcoming work from newly spun-off HSBC Private Equity after putting together the house's first fund as a separate outfit.

The private equity arm, which has been part of HSBC for more than 30 years, was recently bought out when it was decided to separate the two units after the parent bank invested in New York's AEA Investors, creating a number of conflicts.

The £1.2bn fund was set up by Macfarlanes, led by specialist partner Bridget Barker, using a limited liability partnership (LLP) structure for its management.

HSBC Private Equity European LP, was established under the Limited Liability Partnership Act 2000, which provides the management with significant tax benefits.

Also, as the management of the group is resident throughout the UK, Germany and France, it was important for the lawyers to put in place a simplified tax structure that was advantageous for the directors in each of these jurisdictions.

Due to the cross-border nature of the deal, Macfarlanes worked closely with Shaw Pittman in the US, Willkie Farr & Gallagher in France and Germany's Nörr Stiefenhofer Lutz.

Barker also used an LLP structure in setting up a fund for Langholm Capital LP. The management of the house, backed by Unilever and Rabobank International, which invested €100m (£64m) and €75m (£48m) respectively in a fund which is hoped to reach a total of €300m (£192m), is just one of a handful to use the LLP structure.

The Financial Services Authority has so far registered 16 limited liability fund managers, of which Macfarlanes has been involved with five.

According to Barker, using an LLP has two advantages. “It's a very tax-efficient structure plus it is easier for succession if you're introducing new partners,” she said.

Barker added that LLPs are most beneficial for smaller funds where the company's management takes the bulk of the profits.

Of the four law firms which dominate funds work – Ashurst Morris Crisp, Clifford Chance, Macfarlanes and SJ Berwin – traditional private equity firms have used the two smallest.

However, Clifford Chance funds partner Jason Glover, said: “Quite a few of our houses are considering moving to an LLP.”