By: Michelle Hawkins
Private equity is often presented as a numbers game. Buyers are told to focus on EBITDA, debt structures, interest rates, and exit multiples. The spreadsheet models are impressive, and the financial engineering behind acquisitions is a discipline in its own right. But Jeremy Tomes has spent his career proving that no deal succeeds on numbers alone. He argues that the real foundation of private equity is legal, not financial, and that without the right legal framework, even the most promising transaction is little more than a gamble.
Tomes emphasizes that financial models can predict potential, but only contracts and a robust legal strategy can preserve it. A business is not truly “bought” until ownership transfers cleanly, liabilities are appropriately allocated, and the buyer’s rights are secured against future disputes. Without enforceable agreements, carefully reviewed obligations, and clear remedies, buyers are left with uncertainty. And in private equity, uncertainty equals risk.
The Overlooked Side of Private Equity
Many entrepreneurs enter acquisitions with confidence in their financial projections. They see opportunity in distressed businesses, scaling potential in operational efficiencies, or upside in untapped markets. But Tomes points out that these visions are often derailed by overlooked legal flaws. A contract that isn’t assignable. A lien that wasn’t disclosed. An employee lawsuit waiting to be filed. A restrictive covenant that prevents expansion. Numbers cannot account for these risks, but legal due diligence can.
Private equity beyond numbers means recognizing that law and finance are intertwined. Tomes explains that financial assumptions rest on legal clarity. If vendor contracts terminate upon a change of control, revenue projections collapse. If intellectual property isn’t properly owned, the competitive advantage disappears. If environmental compliance isn’t secured, future fines could erase profits. The foundation of private equity is not a spreadsheet; it is the legal documents that make the numbers enforceable.
Building the Legal Framework
Tomes breaks down the legal foundations of private equity into several core elements:
1. Purchase Agreements
The purchase agreement is the cornerstone. It clearly defines what is being sold, what is being excluded, and what each party is responsible for after the closing. Tomes stresses that every line matters. Representations and warranties protect buyers from undisclosed risks. Indemnification provisions create remedies if these protections are breached. Covenants define how sellers behave after the sale, preventing them from undermining the business they just sold. Without careful legal structuring, buyers can find themselves unprotected in disputes.
2. Liability Allocation
No business is risk-free. Buyers must decide which liabilities they are willing to assume and which they prefer to have remain with the seller. Tomes ensures that these decisions are documented clearly. If debts, lawsuits, or contingent liabilities are left ambiguous, they can become costly surprises later. A well-drafted agreement ensures that risks are appropriately allocated and enforceable in court.
3. Transition Services and Continuity
Acquiring a business is not just about taking title; it is about running the business the next day. Tomes points out that without transition agreements, operations can falter immediately. Vendors may walk away, employees may resign, or licenses may fail to transfer. Attorneys anticipate these gaps and build provisions to ensure continuity.
4. Intellectual Property and Competitive Protections
For many businesses, intellectual property is their most valuable asset. Tomes ensures that ownership is properly documented and transferred. He also stresses the importance of enforceable non-compete agreements and confidentiality provisions. Without them, sellers can walk away and recreate the same business across the street, leaving buyers with little more than a shell.
5. Dispute Resolution
Every deal must anticipate conflict. Tomes emphasizes that dispute resolution clauses—whether litigation, arbitration, or mediation are not afterthoughts. They determine how conflicts will be handled, how quickly they will be resolved, and at what cost. Buyers who neglect this detail risk spending years in costly litigation over issues that could have been resolved by contract.
Case Study Style Lessons
Tomes often illustrates his points with examples. Consider the buyer who acquired a profitable manufacturing company, only to discover post-closing that the company’s key supplier contract had a “change of control” clause allowing termination. The supplier walked away, and production halted. The buyer’s financial model had been flawless, but the legal foundation had been weak.
Or the tech entrepreneur who bought a software company without checking intellectual property assignments. Months later, a former employee claimed ownership of the source code. The buyer had no enforceable rights to the company’s core product. Again, the numbers had looked great, but the legal groundwork was missing.
These examples underscore Tomes’ belief that attorneys are not deal obstacles, they are deal protectors. Without them, buyers are exposed. With them, risks are identified, mitigated, and allocated properly.
Why Attorneys Are Essential in Private Equity
Some entrepreneurs hesitate to bring attorneys into acquisitions early, fearing that legal reviews will slow down the process or increase costs. Tomes pushes back hard on this mindset. The cost of proper legal counsel is a fraction of the cost of post-closing litigation or operational collapse. Moreover, attorneys involved early can actually streamline deals by structuring them properly from the beginning.
He emphasizes that attorneys are not just reviewers. They are negotiators, strategists, and architects. They balance power at the table, ensure enforceability, and create a legal shield around the buyer’s investment. Private equity without legal precision is gambling with capital.
The Future of Private Equity
Looking ahead, Tomes sees legal foundations becoming even more critical. As regulations grow stricter, industries evolve, and disputes become more common, buyers cannot rely on financial models alone. Attorneys will continue to play a central role in shaping transactions that stand the test of time. The future of private equity belongs not only to those who can analyze numbers but to those who can structure deals with legal foresight.
Conclusion
Private equity beyond numbers is about recognizing that financial potential is meaningless without legal enforceability. Jeremy Tomes has built his reputation on showing buyers and sellers alike that attorneys are indispensable in acquisitions. From drafting airtight purchase agreements to securing intellectual property, from negotiating liabilities to anticipating disputes, attorneys transform risky transactions into secure investments.
For entrepreneurs and investors, the lesson is clear: focus on the numbers, but never ignore the law. Legal foundations are what turn financial projections into reality. With attorneys like Jeremy Tomes guiding the process, private equity becomes not just profitable but protected.
Learn more about Jeremy Tomes and his insights on private equity law at biglawcapitalist.com.
Disclaimer: The content provided in this article is for informational purposes only and should not be considered as legal or financial advice. Readers are encouraged to seek personalized guidance from qualified professionals for specific concerns related to private equity transactions.
