Details have emerged about the identities of firms that backed a strip sale which helped Eurazeo grow its third-party assets under management.
Lexington Partners and Strategic Partners were among the backers of a continuation fund that acquired partial stakes in a portfolio of assets from the Paris-headquartered manager’s balance sheet, according to two sources with knowledge of the deal.
Lazard advised on the process, Secondaries Investor understands.
The investments were made by Eurazeo Growth, a 15-person team that invests in European tech-enabled businesses from offices in Paris, London and Berlin, Eurazeo said in a statement about the deal last week. It will continue to manage the continuation vehicle.
The transaction was valued at €340 million – €215 million to acquire the stakes and the rest in follow-on capital to develop the portfolio companies and make new investments, the statement noted. The continuation vehicle acquired 32 percent of each company, with the remainder staying on Eurazeo’s balance sheet. The transaction generated an internal rate of return of 25 percent for Eurazeo.
The deal was partly driven by the desire to expand the geographical scope of Eurazeo’s investor base, according to one source familiar with the deal. Asian investors were among the backers of the process.
Strip sales have been at the centre of Eurazeo’s efforts to increase its third-party AUM. In October 2018, it sold a strip of five assets off its balance sheet to a syndicate led by Lexington and used it to seed flagship buyout fund Eurazeo Capital IV, Secondaries Investor reported. Campbell Lutyens advised on that transaction.
The firm closed a similar secondaries deal in 2017 when it raised €500 million in third-party capital for Eurazeo Capital II and invested it in a portfolio of assets it already held.
“My intention is progressively to have more primary capital but there will always be a part of secondary, especially in [buyout arm] Eurazeo Capital,” chief executive Virginie Morgon said in January 2020 in remarks reported by Secondaries Investor. “Maybe down the road Eurazeo PME, the SME business [will also do a strip sale].”
Lexington, Strategic Partners and Lazard declined to comment.
– Adam Le contributed to this report.