AEA chairman quietly shops fund to invest in GP-led secondary deals

As secondaries activity accelerates, more traditional buyout shops are exploring adding these capabilities.

AEA Investors chairman John Garcia has been talking to potential investors about raising a fund in partnership with the firm to invest in GP-led continuation fund deals, sources told Buyouts.

AEA, if it moves forward with the partnership, would be among a handful of buyout-focused GPs building out capabilities to invest in continuation fund deals. Leonard Green hired two secondaries professionals this year to raise its debut GP-led fund that will seek opportunities in its target sectors.

The push is not necessarily new for AEA as Garcia talked to LPs in the past about the strategy, sources said. More recently, he has restarted talks for the launch of the strategy, sources said.

The strategy is called TriBridge Capital, sources said. It’s not clear if the fund has a target, or what stage the discussions are in. Garcia is looking for “a couple billion dollars,” according to one source, an LP who has heard the pitch.

The strategy would be operated in partnership with AEA; the details of the arrangement are not clear.

An AEA spokesperson declined to provide details about the strategy.

Part of the pitch is that buyout dealmakers are well-positioned to work with other sponsors on continuation fund deals, which have characteristics of M&A transactions, one of the sources said. The dealmakers have expertise in their respective sectors and strategies, networks and experience working on these assets, the source said.

Some LPs have pushed back, arguing that continuation fund deals involve more than just deal considerations. They also include a hefty portion of LP relationship management – not likely something many dealmakers have had to handle.

It’s not clear if AEA has invested in external continuation fund deals in the past. It has run such deals on its own assets. In 2023, the firm closed a single-asset deal for its portfolio company Singer Industrial. Lead investors on the process were AEA’s small-business funds, Apollo’s secondaries group called S3 and LGT Capital, Buyouts reported at the time.

In 2022 it also explored a single-asset deal for its asset Excelitas Technologies, which provides photonic products like lasers and services for the lighting, optical and detection requirements of customers, Buyouts previously reported.

AEA’s history dates back to 1968 when it was founded by interests of the Rockefeller, Mellon and Harriman families with SG Warburg & Co. The management company is principally owned by Garcia and CEO Brian Hoesterey. Garcia stepped out of the CEO role in 2019, remaining executive chairman, while Hoesterey, the former president, was promoted to CEO.

AEA has been raising its most recent flagship, Fund VIII, targeting $5.25 billion. Last year, the firm said it had raised about $3.2 billion, according to an SEC filing. The firm closed its seventh fund in 2019 on $4.8 billion.

It also raises small-cap funds, the most recent of which closed on $1.3 billion last year.

Along with Leonard Green, other traditional private equity shops that have built secondaries capabilities include Apollo Global Management, TPG, Accel-KKR and Astorg.

There are probably a further 10 or 20 firms that are likely to enter the secondaries market in the next 12 to 24 months in some fashion, Nigel Dawn, global head of Evercore’s private capital advisory group, recently told Secondaries Investor. When these new groups enter the market, many of which he believes will position themselves as a lead investor, their own investors and co-investors are likely to follow.

“I think over time its impact could be fairly significant, and I wouldn’t be surprised if in five years’ time the secondary market looks radically different than it does today,” Dawn said.