K1 runs process to move three assets, including ReThink, into continuation fund

K1 Investment Management is running a process to move three assets – including the largest called ReThink First – out of an older fund and into a continuation pool for more time to grow the businesses, sources told affiliate publication Buyouts.

The deal is one of the large GP-led processes to round out a year dominated by LP portfolio sales. While activity on the GP-led side has been slower, several large deals have gotten done with buyers choosing to work with only high-quality assets managed by firms they know well.

The K1 deal is fairly new on the market, and could total up to $1 billion, sources said. K1 is working with UBS as adviser on the process.

The three assets are from K1’s 2018-vintage fourth fund, which closed on just over $2 billion. Coller Capital is set up as lead investor on the deal, which is being syndicated out to other investors, sources said.

Early indications are that a large portion of the LP base will roll into the continuation fund, a source told Buyouts, and the deal looks to be oversubscribed. No one from K1 returned comment requests Monday.

The deal would allow LPs in Fund IV to either cash out of their interests in the three assets, or roll into the continuation fund. It’s not clear if the deal is offering existing LPs the chance to roll on substantially the same terms they have in the older fund, known as the “status quo” option.

K1 invested in ReThink in 2020. The company provides cloud-based software services, assessments and client best practice content for supporting individuals with autism and other developmental disabilities. Axios reported last year that K1 was exploring a sale of ReThink, working with Morgan Stanley as adviser.

It’s not clear what other two companies are involved in the secondary deal.

K1, formed in 2011 by a group out of Kayne Anderson Capital Advisors, is in the market targeting $6.25 billion for its sixth flagship fund, Buyouts previously reported. K1 is led by chief executive and principal owner Neil Malik, who formerly worked at Kayne Anderson and built the growth equity practice. K1’s other founders are managing partners Hasan Askari and Taylor Beaupain.

The firm focuses on investments in B2B and enterprise software companies in the lower and mid-market. Typically it invests in sectors like financial services, legal, healthcare and cybersecurity.

K1 has run large secondaries processes in the past. Last year the firm worked on a transaction to move several assets, including the largest, software company Smarsh, into a continuation fund, Buyouts previously reported.

K1’s deal is among a slew of GP-led secondaries moving through the market as the year comes to a close. Along with these deals that have been worked on this year, many new processes are being launched with the intention that they’ll be completed in 2024, sources have told Buyouts. More than $40 billion of new mandates were launched in the third quarter, according to PJT Park Hill.

The market had about $50 billion of total activity, with GP-led deals representing about 35 percent in the first half, according to PJT Park Hill’s volume report. Overall deal volume clocked in at around $15 billion to $20 billion in the third quarter, according to PJT Park Hill.

Other GP-led deals in the market include GenNx360 Capital, which is working to extend its hold over Precision Aviation Group in a deal led by Neuberger Berman, Buyouts previously reported. One of the larger deals is a multi-asset process being run by Leonard Green, which wants to move four assets out of older funds and into a continuation pool.