Operating Partner Agreement

Operating Partner Agreement: A Comprehensive Guide

An operating partner agreement (OPA) is a legal document that outlines the partnership between two or more businesses. It is commonly used in the private equity industry, where a private equity firm partners with an operating company to acquire and manage assets. The OPA defines the roles and responsibilities of each partner, as well as the terms and conditions of the partnership. In this article, we will discuss the key components of an OPA and how it affects the partnership.

Partnership Structure

The first section of an OPA outlines the structure of the partnership. It includes the names of the partners and their respective roles and responsibilities. For example, the private equity firm would be the financial partner, while the operating company would be responsible for day-to-day operations. The OPA also specifies the percentage of ownership each partner has in the business.

Management and Governance

The next section of the OPA outlines the management and governance of the partnership. It includes the decision-making process, such as how major decisions will be made and who has the final say. It also specifies the roles of the partners in the management of the business, such as the CEO, CFO, and CTO. The OPA also outlines the process for resolving disputes between partners.

Financial Terms

One of the most important sections of the OPA is the financial terms. It includes the capital contributions required from each partner, as well as the distribution of profits and losses. The OPA also specifies the funding structure, such as how the partnership will be financed and how much debt it can incur. It also outlines the process for raising additional capital if needed.

Exit Strategy

The OPA also includes an exit strategy, which outlines how the partnership will be dissolved. It includes the process for selling the business or transferring ownership, as well as the distribution of assets. The exit strategy also specifies the circumstances under which the partnership can be terminated, such as a breach of the agreement by one of the partners.

Conclusion

An operating partner agreement is a vital document that outlines the partnership between a private equity firm and an operating company. It defines the roles and responsibilities of each partner and specifies the terms and conditions of the partnership. A well-written OPA can help prevent disputes between partners and ensure a successful partnership. If you are considering entering into an OPA, it is essential to consult with legal experts to ensure that your interests are protected.