Our head of secondaries, Nick Lawler, relates the following story:

“In April 2019, I was in the middle of a road-trip from Chicago to Louisville, when I got a call from one of our relationships at a major investment bank to discuss a new deal. The sponsor, one of the nation’s largest and most respected, was considering a continuation vehicle for what was one of their most sizable, best performing investments. This US-based security guard services business was owned by the sponsor’s seven-year old vintage fund.

“The firm had recently sold a minority stake to a pension fund, delivering liquidity to a family office that had been a long-time investor in the business. It became clear that 1) the business had great growth potential, 2) the sponsor sought majority ownership, 3) there was an opportunity to clean up and consolidate the equity cap table, and 4) investors in the 2012 vintage fund would appreciate receiving liquidity. The sponsor could use capital from its most recent buyout fund for a fund-to-fund trade, but these types of transactions were often frowned upon by LPs, particularly if they are not investors in both funds.