Rolling the Dice with Management Service Agreements

In April 2023, Will Anderson, managing partner of SummitStone Capital, LP (SummitStone), received a copy of the management service agreement (MSA) between Artemis Capital (Artemis), a private equity firm, and Lucky Dice Casinos Inc., one of Artemis’ recently acquired portfolio companies. SummitStone had invested in Artemis buyout funds since 2011 and was in the due diligence phase of allocating $75 million to Artemis’ newest vehicle, Artemis Fund VII. But before Anderson could recommend the fund to his investment committee, he needed to understand the implications of the MSAs that Artemis was forging with its portfolio companies. The case allows students to (i) evaluate a typical MSA contract; (ii) analyze the existing evidence and academic research on MSAs; and (iii) explore possible avenues to adjust limited partnership agreements (LPAs) to align limited partners’ (LPs’) and general partners’ (GPs’) incentives in the presence of MSAs. Students can analyze the qualitative and quantitative implications of MSAs on all private equity fund stakeholders and develop a recommendation to an LP investment committee.