New deal, new opportunity set

With the advent of the fundless GP-led deal, traditional GP-led restructurings are so 2017.

On Monday Deutsche Bank spin-out Glendower Capital announced it had led a consortium to restructure six assets managed by a little-known firm named Argonne Capital, which invests on a deal-by-deal basis. The $530 million deal saw some of the firm’s assets, five restaurants and a fitness centre operator, moved into a four-year continuation vehicle backed by the secondaries buyers.

Here’s what else we know about it:

– Not all of Argonne’s assets were included in the deal (the firm lists three other active investments on its website).

– A significant amount of the carry the firm realised through the transaction was put into the continuation fund (the amount is understood to make up almost 10 percent of the new vehicle), helping to ensure GP alignment.

– Glendower’s Adam Graev and Rikesh Mohandoss (the latter is a Secondaries Investor Young Gun) led the buyside, while Lazard’s Abhi Mitra ran the advisory side.

– There was apparently no stapled element.

This isn’t the first time an independent sponsor has used the secondaries market;  Lazard has advised Exaltare Capital Partners and Vesey Street Capital Partners on similar transactions. But the reason this deal caught our attention was because such transactions are relatively rare, and this is understood to be the largest example of a fundless sponsors applying GP-led tools to its portfolio.

“This is the most creative, bespoke part of the secondaries market,” Carlo Pirzio-Biroli, Glendower’s chief executive, tells Secondaries Investor. Anyone who is not managing an institutional fund can now think about how secondaries can help their portfolio, he adds.

While Argonne does not have immediate plans for a blind-pool fund, it would be a “very logical next step” for the firm now that it has established several high-quality institutional relationships thanks to this deal, Argonne managing director Bill Weimar tells Secondaries Investor. The likes of Blackstone’s Strategic Partners, Hamilton Lane and GSM Grosvenor joined Glendower in the consortium, bringing Argonne’s institutional credibility to another level. No doubt Glendower et al will be introducing Argonne to their own LPs before long.

The logical question is: how big an opportunity does the fundless sponsor market present to secondaries buyers? It’s tough to come by hard data, but consider this: many of these firms aren’t registered with the US Securities and Exchange Commission or the Financial Conduct Authority in the UK as they don’t raise institutional funds. If they aren’t on institutional investors’ radars, chances are they aren’t on many secondaries buyers’ either, meaning there’s a potential goldmine in dealflow waiting to be tapped.

Are you aware of any other secondaries deals involving fundless sponsors? Let us know: or adamtuyenle