Limited Guarantee
(Private Equity Sponsor) (DE)

Summary

This Limited Guarantee (or Guaranty) form may be used for a private equity sponsor in an acquisition to guarantee payments to be made by the acquisition subsidiary (or subsidiaries). This template contains practical guidance, drafting notes, and optional clauses. The target company in a private equity acquisition will often require a guarantee by the private equity sponsor in order to ensure that the acquisition subsidiaries will have funds available to pay the purchase price, any termination fee or indemnification payments that may become due in connection with the transaction. The private equity sponsor is generally not a party to the acquisition agreement and the acquisition subsidiaries are usually shell companies without any assets of their own, so the Limited Guarantee is necessary to create a binding obligation enforceable by the target (as opposed to other members of the acquisition group in the Equity Commitment Letter) by a solvent entity to pay any necessary amounts. For a full listing of related private equity and asset acquisition content, see Private Equity Transactions Resource Kit and Asset Acquisition Resource Kit. See Private Equity Investment Structures for further discussion. Also, see template Equity Commitment Letter (Private Equity Sponsor).