Transaction costs are split among the parties involved in the transaction, with allocation varying by deal. The main cost categories include legal fees for structuring and documentation, valuation costs (if a third-party valuation or fairness opinion is obtained), advisory fees, accounting and tax structuring costs, and regulatory filing fees.
Common cost allocation:
- Original fund bears costs related to the transfer process and LP election administration
- Continuation vehicle bears costs related to forming and operating the new structure
- Secondary buyers cover their own legal and diligence costs
- GP may bear certain costs, particularly if the transaction is primarily GP-motivated
Cost allocation is disclosed in the transaction materials. LPs should review how costs affect their net proceeds (if selling) or their starting position in the new vehicle (if rolling).
For a full overview of continuation vehicle mechanics, see the Continuation Vehicles guide.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation. Capital Company is not a law firm and does not provide legal advice.