Tue, Aug 3, 2021
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Private equity's new trend: selling to themselves

Friday, April 09, 2021

By: Andreas Hinsen, Loyens Loeff

The decline in global M&A activity during the Covid-19 pandemic, combined with the ongoing lack of attractively priced targets, led to a rise in an alternative exit scenario for private equity firms: selling their portfolio companies to themselves, typically by creating a so-called continuation fund. Such deals are no novelty but given their rising popularity, a closer look should be taken at the potential pitfalls involved in such deals.

Typical scenarios and structure

A sale to oneself is often used in any of the following two scenarios:

  • As a leeway to hang on to well-performing portfolio companies with good returns. This is one of the results of the trend of funds holding onto their investments longer, potentially beyond their initially planned life-cycle.

  • Or as solution if a buyout fund nears the end of its life cycle but has not yet sold (all of) its portfolio companies. This is in particular the case where additional time is needed before a satisfactory exit can be achieved, a scenario which became more frequent due to the Covid-19 pandemic.

To execute such an older-to-newer fund sale, a private equity firm often creates a so-called continuation fund. Investors of the existing fund can either exit or reinvest/rollover in the new fund. This new fund is then used to buy one or several portfolio companies already owned by the firms' other (older) funds.

Such continuation funds are often e......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Distressed-debt funds get no love as credit problems disappear[more]

    From Bloomberg: Private debt investors are turning away from distressed funds amid shrinking opportunities to profit from troubled companies. Investors were less keen to put their money to work in funds that target distressed credits in the past quarter than a year ago, according to a poll of

  2. Investing: Cathie Wood's Ark Invest abandons Chinese tech stocks amid regulatory crackdown[more]

    From Business Insider: Cathie Wood's Ark Invest has slashed its exposure to Chinese tech stocks amid an ongoing regulatory crackdown, according to Ark's daily trading updates. Ark's flagship Disruptive Innovation ETF has seen its exposure to Chinese stocks fall to less than 1% from a high of 8

  3. SPACs: SEC abruptly kills Ackman's controversial SPAC plans, Bill Ackman rejigs Universal deal after regulators probe SPAC plan, SPAC-ing the Southeast Asia story, SPAC deals will rebound for remainder of 2021[more]

    SEC abruptly kills Ackman's controversial SPAC plans From Institutional Investor: The Securities and Exchange Commission has killed Bill Ackman's special purpose acquisition company's complicated plan to invest in Universal Music Group. On Monday, his SPAC, Pershing Square Tontin

  4. New Launches: Apollo investors look past Black-Epstein tie to back impact fund, Leeds Equity closes in on $1.25bn for its seventh buyout fund, Schroders Capital surpasses $389m for its fifth European infrastructure senior debt fund, Neuberger Berman closes NB Private Equity Impact Fund at nearly $280m, HSBC AM launches fintech venture capital strategy, Slate rounds up close to $600m for first credit fund, Trifecta Capital raises $130m for close of VC fund, Lumira Ventures closes on $255m of new capital to build transformative healthcare companies[more]

    Apollo investors look past Black-Epstein tie to back impact fund From Bloomberg: The backlash against Apollo Global Management Inc. over Leon Black's ties with sex offender Jeffrey Epstein is waning, with investors lining up to entrust the firm to manage investments dedicated to social

  5. Investing: Tiger Global: The technology investor ruffling Silicon Valley feathers, Addepar raised $150m from hedge fund D1[more]

    Tiger Global: The technology investor ruffling Silicon Valley feathers From FT: For the first 15 years of running Tiger Global Management, Chase Coleman wore a suit every day in the hopes that investors would look past his inexperience. Today, his firm faces a different kind of reputat