As Hellman & Friedman roars to $20bn, it explores liquidity options for LPs

Hellman & Friedman is exploring a process that would allow limited partners to cash out of their interests in a basket of assets held in older co-investment vehicles, three sources told affiliate title Buyouts.

The deal would be highly customised, targeting specific assets rather than a broad-based tender of LP interests across older funds. It would be an example of the kind of creative deals GPs have been using to deliver liquidity to LPs who are highly focused on getting capital back from their PE programmes at a time when distributions have slowed.

Hellman is considering options working with Evercore as adviser, sources said. No deal is active in the market yet and it’s possible a transaction never happens. A spokesperson for Hellman & Friedman declined to comment.

Importantly, the process would not be connected to the firm’s flagship fundraising, which has been in the market since last year. Fund XI is targeting $24 billion and has collected around $20 billion, according to an LP who knows the firm.

The pace would indicate the firm does not need the assistance of a secondaries process to help boost fundraising. Several other firms have run tender-offer-plus-staple processes to try and inject fresh capital into sluggish fundraising, including Carlyle Group and Sun Capital.

The secondaries deal being envisioned would allow LPs to sell their interests in the assets, though there is not a continuation fund component, sources said. That could change as Hellman explores options.

Hellman & Friedman has run large secondaries in the past. The firm ran a large GP-led secondary in 2020, moving three assets out of its Fund VII and into a continuation fund. The largest asset in that deal was Verisure, an alarm and security services company.

The firm also ran a single-asset secondaries process on tech company Kronos in 2018.

Secondaries are expected to gradually open up into the second half of the year. GP-led deals tallied around $52 billion out of total volume of $108 billion last year, according to Jefferies’ full-year 2022 secondaries report. Single-asset deals represented around 50 percent of completed GP-led volume, the report said.

Hellman, meanwhile, is running a strong fundraising process despite the sluggish environment. Most firms are taking longer to hit their targets; some are raising smaller funds and others are delaying fund launches, or even dropping parallel strategies to focus on flagship vehicles.

Part of its appeal is its track record, which clocked in at 30 percent gross and 22 percent net internal rate of return since inception as of 30 June, 2022, according to a presentation to the Pennsylvania State Employees’ Retirement System.

This article first appeared on affiliate title Buyouts