GP-Led Transactions
A GP-led transaction is when the GP (General Partner) initiates a process to provide LPs with liquidity and/or restructure ownership of one or more assets, typically by moving them into a new vehicle.
This can take the form of different types of transactions, the most common of which being single-asset and multi-asset continuation funds. Other GP-leds include tender offer, strip sale, preferred equity, GP-interest, stapled primary, and other forms of fund restructuring.
What is a Continuation Fund?
A continuation fund is a new fund created by the GP where one or more assets from a previous fund moves into a continuation vehicle. This is created for many purposes, with the primary reasons including providing legacy investors with an option for liquidity, extending the holding period of assets, continue to realize upside on a marquee asset, refresh economic terms, and optimize exit opportunities.
In a continuation fund, legacy investors have the option to roll over or cash out, where they can choose to reinvest into an asset they already had previous exposure to. Oftentimes, continuation funds are created when the fund is more mature and when uncalled capital commitments are low. Thus, creating a continuation vehicle allows the GP to inject fresh capital into an asset, allowing the GP to continue to invest in a marquee asset. This also gives GPs the ability to refresh economic terms, which include changing the waterfall structure from the LP preferred return (hurdle rate), management fees, and GP carry. Additionally, especially with the recent growth of GP-leds from the growing use of continuation funds, moving one or more historically well-performing assets means GPs can extend the holding period of a marquee asset and continue to realize upside. Finally, extending holding could also mean optimizing exit opportunities for when the exit environment may be more favorable.
What is a Tender Offer?
A tender offer is a GP-initiated one-time liquidity window where LPs can sell some or all of their fund interests to secondary investor instead of waiting for the typical cash distributions. This is
