Good or Bad Implications of Secondaries Restructuring Exit

All --

Curious to know what can be inferred when a private equity firm exits to a secondary LP. Positive or negative indicator of that fund's performance?

For example, a situation like this: https://www.prnewswire.com/news-releases/wind-point-partners-and-neuberger-berman-private-equity-close-continuation-vehicle-300721870.html

------ "Wind Point Partners, a leading Chicago-based private equity firm focused on middle-market businesses in North America, and funds advised by Neuberger Berman, a private, independent, employee-owned investment manager, today announced the successful closing of Wind Point Partners CV1, L.P. ("Wind Point CV1"). Wind Point CV1 was formed as a continuation fund to acquire two of the remaining portfolio companies, RailWorks Corporation and Ascensus Specialties, owned by Wind Point Partners VI, L.P. (together with its affiliated funds, "Wind Point VI"), a 2006 vintage fund with $715 million of original capital commitments." -------

My guess is bad (i.e., fund vintage / non-traditional exit implies these investments were sitting on the books delivering lackluster performance) but curious to see what take others might have on this.

Comments (6)

 
Jun 26, 2019 - 9:56am

Secondaries guy here. Agree with your assessment. All such restructuring deals that I have seen resulted from some cock up along the way eg. deflated IPO market, portfolio company not doing well but still has "embedded value" if given time to recover, key member left etc.

If they really did do what they were supposed to do/plan for them/had existing LPs supporting them, they wouldn't have been in a restructuring scenario.

 
Jun 27, 2019 - 12:37am

Yes - agreed with the above posts. Although, in certain situations, these decisions can be LP driven (portfolio reset, want less exposure to the industry, etc).

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 
Jun 27, 2019 - 10:18am

goodL1fe:

Yes - agreed with the above posts. Although, in certain situations, these decisions can be LP driven (portfolio reset, want less exposure to the industry, etc).

but if LPs wanted less exposure they will sell their stake. No need for a restructuring?

No idea just my guess. Dont work in d industry

 
Jun 28, 2019 - 12:15am

Yes that's correct. I was taking a step further by once an LP has decided to sell the GP may broach the new investor about additional capital, hence the restructuring. Sometimes there are vanilla LP sales and sometimes more complex.

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
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