GP leds: Building the right team

Appointing an internal team to oversee a GP-led deal, and working with advisory and legal partners early, can help smooth what can be a time- and resource-intensive process.

Those that have undertaken GP-led secondaries deals invariably report that they are more demanding than anyone anticipates. It is therefore imperative for sponsors to ensure they have all the necessary resources in place from the outset.

“The big take-away for me is that these processes take more time, and require more attention, than anyone ever expects,” says HarbourVest managing director Rajesh Senapati, adding that three to four months is a conservative projection for the overall timeline, while some deals can take from six to nine months to ultimately close. “I have also noticed that it is really important for GPs to have a designated individual or series of individuals internally who are charged with running the show. You can’t just rely on third party advisers and legal counsel to facilitate the process.”

Justin Green – a partner and co-head of flagship funds at Palladium Equity Partners, which recently closed a multi-asset continuation fund – says the firm’s in-house team, including investment and operations executives, was actively involved in the process. “Having the internal team responsible for project management helps make the process as smooth as possible,” Green explains.

Meanwhile, David Lippin, a partner and head of investor relations at One Equity Partners, which closed a $1 billion continuation vehicle last year, says it is important to have both deal and capital formation teams involved each step of the way. Nonetheless, the legal professionals are essential in providing support in the continuation vehicle space. “It takes a lot of lawyers and legal expertise. The legal hours spent on these vehicles is substantial.”

Having a banker run the auction is also a prerequisite. “You need a banker to ensure fair value for the assets so LPs can be confident in the valuations they’re investing at,” Lippin continues, adding that it is critical to be discerning in selecting a bank for the job. “A lot of the big investment banks have gone out and hired [people] to run continuation vehicle teams, but each bank offers different levels of expertise and experience. It is important to select a good partner on the banking side when it comes to all the nuances involved in successfully closing these deals.”

Debevoise & Plimpton partner John Rife agrees: “Specialist secondaries advisers have an excellent sense of the market – what is resonating well with potential buyers and what is not – and so having a competent secondaries intermediary involved can really help the sponsor manage its own expectations and form a view of what it can realistically expect in this market.

“You are setting yourself up for failure if you don’t get that commercial advice early on. We have seen sponsors getting a long way down the track without really understanding what buyers are looking for and so, when they do eventually go to market, the deal falls flat.”