Takedown

Takedown is referred to in the case of security issuance and payments into a venture capital or private equity fund. In the first complex, one meaning of takedown is the price underwriters pay the issuer for a specific security that afterwards is offered to the investors.

In this context, takedown might also describe the commission the (investment) bank keeps for the various services offered by the different banks, for example, managing the syndicate, taking risk, arranging the security issuance, and distributing the securities to the public. As already mentioned, the compensation between the banks differs.

The lead manager may approximately receive 15–20%, and the underwriters between 50 and 75% of the total compensation for an underwriting. If the lead manager is also an underwriter (as is usually the case), and belongs to the selling group, he participates in all revenue segments of a syndicate.

The second meaning of takedown related to security issuance is the proportion (absolute amount) or quota (percentage) of the security a (investment) bank is going to distribute in a syndicated sale or an IPO. Furthermore, it refers to a "takedown transaction" if, during the first trading day of a new security, an underwriter or syndicate manager sells transaction securities below the list offering price in a primary market sale.

Takedown is also relevant in the context of managing venture capital and private equity funds. Here takedown is the amount of money an investor transfers to the fund. To find attractive target companies and to concentrate on only a few deals at a time, the fund managers refrain from collecting all the money the investors promised to invest into the fund, the so-called committed capital, at one point in time. Another reason for not paying all the funds prematurely is that the interest paid by the bank is significantly lower than the rate of return the investments of the fund are expected to achieve.

The partnership agreements, which the limited and the general partners enter into, usually contain a takedown schedule as a specification of the way and the timing the funds are paid in. Typically, an initial payment (set amount) of up to 33% of the committed capital is arranged.

For the subsequent payments either fixed dates for the takedowns are set in the agreement or are let to the discretion of the general partner. In the latter case, a minimum and a maximum time period is fixed. One year, or at the latest 3 years, at er a fund’s inception all funds are drawn from the limited partners.

Takedown