Successfully navigating the dislocated markets, Trinity Hunt Partners closed a deal to move two assets out of an older fund and into a continuation pool for more time and capital to grow the assets.
The deal, a concentrated-asset GP-led secondaries process, is one of a few that have been able to make it to final close this year despite the widening bid/ask spread. Closing deals has become a challenge even as more GPs are exploring ways to deliver liquidity to LPs as exit activity has slowed.
Dallas-based Trinity Hunt, formed in 2004, moved two assets: Argano, which provides tech services to businesses, and tech-services company Improving, into a continuation fund, the firm announced last week. The firm formed Argano in 2021, and invested in Improving in 2018.
The deal totalled $618 million, with a chunk of the capital available for future follow-on investments and growth, the firm said. Lead investors on the deal were StepStone Group and Schroders Capital, with participation from additional investors and roll-over LPs. Credit Suisse worked as secondaries adviser on the deal.
Existing LPs in Trinity Hunt’s fifth fund had the option to either cash out of their stakes in the companies, reinvest into the continuation pool or even take partial liquidity. The breakdown of LPs who chose to sell or roll is not clear. The firm closed Trinity Hunt Partners V on $350 million in 2018.
Trinity Hunt has identified opportunities for growth in the two companies, according to Blake Apel, managing partner at Trinity Hunt. “These two companies specifically are in relatively recession-resistant industries and have proven growth strategies ahead of them,” he said. “We wanted to continue to own and participate in that growth into the future. And our management teams wanted to continue under Trinity Hunt’s ownership.”
Trinity Hunt closed its most recent pool, Fund VI, on $460 million last year. The firm is led by Apel, senior partners Dan Dross, Peter Stein, and partners Scott Colvert, Michael Steindorf and Garrett Greer.
For StepStone, the deal represented the kind of opportunities it is seeking, “backing our highest conviction sponsors” and “finding companies we think are durable and high quality that will perform really through any macro cycle”, according to Adam Johnston, a partner at StepStone.
Deals have become harder to close as pricing expectations diverge between buyers and sellers. Sources said anecdotally activity has slowed, although GPs continue to bring processes to market, potentially to put them out in front of buyers to close next year.
“The offerings are out there; we’ve definitely seen more difficulty getting to price agreement,” a secondaries buyer told affiliate title Buyouts recently.
Single-asset deals have been a popular way for GPs to deliver liquidity back to LPs in older funds without having to fully exit an investment. Campbell Lutyens, in its first-half secondaries volume report, found single-asset deals as a share of overall GP-led deals increased to 51 percent from 40 percent during the same period last year.
GP-led secondaries, a category that has helped drive market volume over the past few years, has retreated slightly amid a resurgence in LP portfolio sales.
GP-led secondaries deals represented about 36 percent of the $53 billion in total deal activity in the first half, according to Campbell Lutyens. The firm’s report differs from two others recently published by Evercore and Lazard showing GP-led deals still representing a slight majority of overall deal activity.
This article first appeared on affiliate title Buyouts