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]