Deal-by-Deal Financing

An increasing number of high quality GPs who chose to raise capital on a deal-by-deal basis, in order to keep the flexibility in terms of deal size and the speed at which capital needs to be deployed.

We typically work with reputable PE firms who i) do not have a committed pool of capital; ii) find themselves in a “in-between funds” situation; or iii) prefer to spend their time doing deals, instead of being on the road fundraising.

GP-Led Transactions

A wide range of transaction structures allowing a Fund Manager to leverage existing assets to raise additional capital i.e. restructuring an exiting fund, late primary commitment in a fund after a few investments have been completed, etc.

Such transactions by nature generate lots of conflicts of interest. We believe in not only following industry and regulatory guidelines, but also making sure that the transaction is fair and satisfactory to all parties, and truly win-win.

Special Situations

Fund managers often experience unforeseen situations, which may arise throughout the life of a fund, such as a fundraising effort which loses momentum, need for follow-on capital exceeding the Fund’s reserves, an LP’s need for liquidity in a co-investment, etc.

What is perceived as a problem in a particular situation can often become an opportunity by changing perspectives, and creating a transaction that would be suitable to a different category of investors.

Examples of Transaction Types

Capital Raising on a Deal-by-Deal Basis

We are not a typical placement agent: our only focus is on individual deals, not blind pools of capital. Contrary to traditional placement agents who market a team and their past performance, approaching many potential LPs, to get a commitment from a handful through a lengthy and often painful process, we focus on individual deals.

We typically work with PE firms who: 

  • Do not have a committed pool of capital, either by choice or by the reality of the market;
  • Find themselves “in-between funds” and want to stay active in the market;
  • Wish to use co-investments to recruit new LPs, while generating economics;
  • Wish to syndicate an investment that is too large for the size of an existing fund.

Over the years, we have mapped the universe of investors interested in the model, together with their constraints and preferences in terms of sector, size, geography, etc. in such a way that we can take identify and initiate a dialog with best targeted investors quickly, efficiently and quietly.

Late Primaries

A firm may lose momentum in the fundraising process. They may have a first closing, and start investing, but stop short of the fund’s target. A Late Primary transaction puts the highlight on the existing investments of the fund and their performance. It may be the path of least resistance to raise additional commitments, if the funded:unfunded ratio allows for positioning the proposed commitment as an early secondary.

GP-led Fund Restructuring

The most common form of a GP-led fund restructuring is for a fund manager to sell all or parts of the assets of a legacy fund to a newly established vehicle, under its own management, with a mix of existing and new LPs.

Why would a Fund Manager want to do that?

A GP-led fund restructuring transaction may make sense for a legacy fund, for example

  • If some of the assets need significantly more time to liquidity
  • if there is a need for follow-on investments beyond the reserves of the fund, and beyond LPs’ willingness to commit further capital
  • LPs need for liquidity

Conflict of Interest

The GP selling from one vehicle to another, the conflict of interest is obvious, and regulators have been paying close attention to such transactions in the recent years. It is very important to build a transaction in such a way that the rights of existing investors are preserved. ILPA has published guidelines on the topic.    

Leveraging Legacy Assets

A variation of Late Primaries described above, with some technical differences. It could be relevant to groups who have completed deal-by-deal transactions, with the idea of transferring the assets in a co-mingled vehicle. Legacy assets would form the funded portion of the vehicle, and the new commitment the unfunded part, recreating a reasonable funded:unfunded ratio.

Post-Closing Syndication

PE firms frequently engage a in a transaction that is too large for the size of their fund, or creates too much exposure to a particular sector.
In the majority of cases, the problem is solved prior to closing, by bringing in co-investors, whether they are LPs and whether they pay economics on the co-investment or not, or alternatively they could share the transaction with other PE firms. 
However, at times, their bylaws permitting, and with the blessing of their LPs, a PE firm may chose to close the transaction with its existing capital commitments, and syndicate it post-closing.
Doing so, the firm will keep control over the board and receives economics on the larger transaction, while reducing the exposure of the fund to the transaction

Case Study:

London-based GP who had completed an investment in a highly structured transaction in the luxury consumer space. The size of the transaction created an over-exposure to the sector and to a single transaction that called for a post-closing syndication transaction.
A total of €17m  was raised by RainMakers from 1 large European family office and 1 NY-based family office.

Raise Follow-on Capital for Portfolio Companies

There may be a need for follow-on investments for portfolio companies of a fully invested fund, with insufficient reserves for follow-ons.Under certain circumstances, it might make sense to raise additional capital in the form of a co-investment, which wouldn’t dilute the firm’s overall ownership and influence within the portfolio company, and by the same token generate economics for the GP.

Co-invest Secondaries

Co-investments and direct minority investments are undoubtedly the most illiquid segment of the asset class. Unlike LP interests, for which the secondary market has become efficient and well-intermediated, co-invest and direct minority interests are much harder to tackle, for both potential buyers and intermediaries.

When an LP has co-invested with a Fund Manager, and when they are in need for liquidity or simple want to divest the co-investment, they naturally turn to the Fund Manager. 

This is an opportunity for the Fund Manager to keep their investor happy, while starting a relationship with a new LP. 

At RainMakers PE, we have been working on secondary transactions involving minority stakes since 2005, and expanded into co-investment opportunities in 2009. We have mapped the ground, developed a broad network of investors and acquired an unparalleled understanding of the market.

We can help you turn what is perceived as a problem into an opportunity. 

 

Direct Secondaries

with the remarkable developments of co-investments over the last few years, we are starting to see secondary transactions on co-investments, and we believe that co-invest secondaries will expand in the years to come. In the event that an existing investor is seeking liquidity, co-invest secondaries can be a precious tool to recruit high quality and long-lasting new LPs.