Question about Co-investing

PE

1mo

Most Helpful

I would say most GP to GP co-investment deals involve one majority investor and a few minority ones.They can seek out other GP firms to help with the financing but they will each have a very small percentage of ownerhsip - very rarely any board seats or important say in the target company. The majority GP investor doesn't really expect synergies from the co-investors unless they have a large percentage like 15-30%, which is unusual. Think of it as like an alternative to debt financing - an additional equity check. The majority investor needs 100m$ equity on top of their own to secure their 1bn$ deal and will seek out this money from a few different GP's to coinvest. Much more common for the majority GP to delegate 5-15% of the target co to 5-10 other smaller GP firms. They can prioritize the smaller firms that can provide some type of expert advice or experience, but my experience is that these co-investors are mostly passive. I don't really have experience between 2 GP's coinvesting on almost equal terms though, but for sure this is much rarer.

yaddayaddayadda

IB

1mo

Thank you so much for the helpful reply. So basically, in most cases, the major GP may anticipate synergies with another of its port cos, but the smaller co-investors (that the major GP takes on for the purpose of financing) don’t have this expectation to take advantage of any such synergies?

tl_1

PE

1mo

I would say so yes. Synergies can come through the means of expert network or just general advice between the co investors. But really the main GP is just looking to gain equity/reduce leverage (especially these past few months/ end of last year where the cost of debt has been really high. Co-investments have risen as a good alternative to finance deals)

yaddayaddayadda

IB

1mo

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