As the private equity industry matures, an increasing number of funds are exceeding their partnership terms and in many cases their extension periods. Most of these funds have little remaining net asset value with a small number of residual portfolio holdings. Consequently, they require excessive GP time commitment, oversight, management and administrative and reporting resources relative to their small value.
PEI provides a variety of solutions for General Partners of mature funds and funds-of-funds, including:
Fund or Fund-of-Funds Wind-Down – The purchase of all the remaining interests in a fund or fund-of-funds for cash, providing instant liquidity to investors and an expeditious termination of the fund.
Asset Purchase – The purchase of interests in select portfolio companies or a strip of all interests directly or indirectly, providing cash to counterparty funds, or enabling counterparty funds to avoid the punitive consequences of follow‐on rounds of financing for which they do not otherwise have liquid resources.
Tender Offer – This approach provides for the purchase of any and all LP interests in a fund. Sometimes a situation arises where a partnership is nearing the end of its term, but the portfolio still retains value and the portfolio companies require ongoing active GP management. A tender offer allows the GP to provide its LPs with a cash alternative to the extension of the mature fund.
Restructuring – Occasionally it becomes desirable for a General Partner to restructure the GP composition and agreement due to changing circumstances of individual or institutional members of the GP. In other cases, availability of additional funding to support portfolio companies may also be desirable. PEI provides individualized and creative solutions to situations of this nature, working with the GP to create a satisfactory solution for the GP and LPs alike.
Solutions Provide GPs:
- A strategic exit for older funds, allowing focus on new and larger funds and investments
- Reduction of administrative burden of managing older funds and LP relationships'
- Liquidity options for LPs in older funds
- An exit alternative for portfolio holdings when capital markets are tight
- Alternatives when faced with a potential cram down or other dilutive financin