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The Recent Restructuring of Primary Private Equity Vehicles - March 2014

by Francesca Braganza

  • 13 Mar 2014
  • PE
Since the financial crisis in 2008, which subsequently saw fundraising levels for private equity funds drop from $688.5bn to $319.9bn the following year and fail to even come close to the peak levels again, the fundraising environment for private equity vehicles has clearly been highly challenging. Operating in an unsteady economic environment, private equity funds can face real difficulties in exiting their underlying investments and returning capital back to investors, particularly given the limited life span of the funds. In such situations, fund managers may turn to outside investors to inject new capital into the vehicles in order to boost the development progress of the companies invested in.
 
Preqin’s Secondary Market Monitor online service tracks these transactions; one example is the completion of the deal in January 2014 by HarbourVest Partners, whereby the firm agreed to restructure Motion Equity Partners’ Electra European Fund II. The firm injected new capital into the buyout fund to allow for an additional two or three deals, and the fund’s life was extended by four years. HarbourVest Partners purchased the fund interests of a number of the investors in Electra European Fund II, with a proportion of LPs holding onto their stakes in the vehicle.
 
JW Childs Equity Partners III is also undergoing a restructuring deal in order to create new investment opportunities. Canada Pension Plan Investment Board (CPPIB) is leading a group of investors planning to contribute a total of $1.3bn to the 2002-vintage buyout fund, and will approach a number of investors in order to purchase existing stakes in the vehicle. J.W. Childs Associates has reportedly hired Park Hill Group to act as advisor and manage the restructuring process.

Since the financial crisis in 2008, which subsequently saw fundraising levels for private equity funds drop from $688.5bn to $319.9bn the following year and fail to even come close to the peak levels again, the fundraising environment for private equity vehicles has clearly been highly challenging. Operating in an unsteady economic environment, private equity funds can face real difficulties in exiting their underlying investments and returning capital back to investors, particularly given the limited life span of the funds. In such situations, fund managers may turn to outside investors to inject new capital into the vehicles in order to boost the development progress of the companies invested in. 

Preqin’s Secondary Market Monitor online service tracks these transactions; one example is the completion of the deal in January 2014 by HarbourVest Partners, whereby the firm agreed to restructure Motion Equity Partners’ Electra European Fund II. The firm injected new capital into the buyout fund to allow for an additional two or three deals, and the fund’s life was extended by four years. HarbourVest Partners purchased the fund interests of a number of the investors in Electra European Fund II, with a proportion of LPs holding onto their stakes in the vehicle. 

JW Childs Equity Partners III is also undergoing a restructuring deal in order to create new investment opportunities. Canada Pension Plan Investment Board (CPPIB) is leading a group of investors planning to contribute a total of $1.3bn to the 2002-vintage buyout fund, and will approach a number of investors in order to purchase existing stakes in the vehicle. J.W. Childs Associates has reportedly hired Park Hill Group to act as advisor and manage the restructuring process.

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