Travers Smith's Philip Sanderson asks what lessons deal professionals should take from private equity's years of turbulence

So what have we learned? Humility? Perhaps not. Pre-Lehman, we feasted on leveraged deals and had little time to draw breath. Post-Lehman, we talked about 'opportunities' and returned to a duller world with less M&A and more time for school sports days.

What now? Deals have returned over the last 12 months, and as I write we are already hearing about the return of covenant-lite debt, securitised finance and mega buyouts. 2011 would seem to be a good time for us lawyers to look back on boom, bust and equity recalibrations and remember what we may have gleaned from the experience. How should we be helping our clients' perceptions of private equity terms to evolve?

Clients still value pragmatic legal advice that enables them to get the deal done, and private equity has always attracted lawyers with a surplus of these skills. But expect something of a retrenchment. We will remain valued for our execution skills but we will need to offer more forward-looking advice and, in particular, an analysis of what happens if the deal goes wrong – because our clients have seen deals go wrong.

Lawyers who have learned the right lessons will now stress-test the deal documentation. Could the vendor loan impact on a restructuring? (In our experience the vendor loan is one of the most common restructuring elephant traps.) Which stakeholders will be able to stop your client from protecting its investment? (Too often clients only understand this issue when it is too late.) Have minorities been given any veto rights, either by contract (rare) or by law and, in particular, do your clients understand what the potential impact of class rights could be? What is the ability of an investor to cure any financial covenant breach? Does the cure wording actually work, and how does a potential cure or reorganisation sit within the straitjacket structures we are increasingly advising on? What is the impact of a change in sentiment or financial position of one stakeholder (eg, a limited partner or a bank or a transferee of any such stakeholder)?

What commercial or non-legal considerations do we need to understand before concluding this analysis? Does the debt documentation sync neatly with the equity documentation? Does either correlate to the structure of your clients' funds and corporate groups? Know your client and be prepared to challenge your client in the frenzy of deal excitement. That is our role.

We have also learned (again) the importance of a good management team. But, if anything, the last few years of flux have confirmed that there remains great flexibility in the model. Leaver provisions should ensure that departing management ceases to matter. Provided the investor has a majority and can hire, fire and control the board, it can maintain a firm grip on the governance of a company, whatever the equity documents say.

Was it really worth the hours of negotiation? Yes, but don't over-focus on management terms to the exclusion of more dangerous stakeholders such as rolling sellers, banks and mezzanine providers. Old hands make the most of the inherent flexibility and understand that the relationship with management is built on something far away from the legal documentation while the relationship with other stakeholders often starts and ends there.

Finally, it would be surprising if so-called market norms were not called into question by our clients. This is a good time to challenge assumptions. Should we not be sitting alongside our clients questioning assumptions?

The most fundamental of these is the traditional legal relationship that our clients have with their management teams. We need to stop making assumptions about how our clients view this relationship. The primary deal management's value is usually in what it can deliver over the next stage of a company's development, but this point is sometimes lost in the shadow cast by market terms formulated by multiple secondary buyouts.

On secondary buyouts, we should question our clients' obsession with the distinction between strip equity and sweet equity, particularly where the selling management is realising cash. Or perhaps we should be making the distinction sharper still, with sweet becoming valueless more easily if the management sellers' business plans fail to deliver.

Conversely, the last few years have seen clients having to prove their positive influence on companies, often through implementing management change. Has this left management holding a less certain and valuable carrot (of a return on sweet equity)? How will this impact the deal terms of the future? This is the time for us to help shape the framework, not assume the old order will simply return.

Philip Sanderson is head of private equity at Travers Smith.