AlpInvest, HarbourVest emerge as lead investors on Leonard Green GP-led process

The deal is leading off a year that many secondaries players expect to be particularly busy with not only GP-led transactions like restructurings but also large, traditional LP portfolio sales.

AlpInvest Partners and HarbourVest Partners have emerged as lead investors in a large GP-led secondaries deal that will move assets out of a 2007 Leonard Green fund and into a continuation pool, sources told Buyouts.

The Leonard Green deal is one of the highest-profile transactions in the secondaries market as it involves a blue-chip GP with strong assets. The deal is leading off a year that many secondaries players expect to be particularly busy with not only GP-led transactions such as restructurings but also large, traditional LP portfolio sales.

Other large GP-led secondaries transactions in market involve Kohlberg & Co, which wants to move assets out of its 2012 fund and into a continuation pool. Ardian has also emerged as the lead – and potentially sole – investor on a large continuation fund deal by New Mountain.

Leonard Green is working with Evercore on the process. It is seeking to move assets out of its 2007 fund and into a continuation pool, giving the GP more time to manage the assets while delivering proceeds to LPs in the older fund, Green Equity Investors V.

One of Buyouts‘ sources, a buyer in the secondaries market, said that for existing Fund V investors cashing out, pricing is set at a slight premium to net asset value as of September 30, 2020.

The sources said the deal is being widely syndicated in the market, meaning that along with the two lead investors, a broad investor group is forming on the transaction.

A Leonard Green spokesperson declined to comment.

The firm closed Green Equity Investors V on $5.3 billion in 2007. Fund V was generating an 18.1 percent net internal rate of return and a 2.2x multiple as of March 31, 2020, according to performance information from the California Public Employees’ Retirement System.

Green Equity Investors V had about $2.2 billion of gross asset value as of March, according to the firm’s most recent Form ADV.

It is not clear exactly which assets are included in the sale. According to Leonard Green’s website, current investments in the firm’s portfolio that were made during the timeframe Fund V was investing are: AerSale Holdings (2010), Aspen Dental (2010), Authentic Brands Group (2010), CHG Healthcare Services (2012), The Container Store (2007), Jo-Ann (2010), Prospect Medical Holdings (2010) and Union Square Hospitality Group (2012).

Leonard Green was formed in 1989 and is focused primarily on service industries in the consumer, business and healthcare, and retail sectors. The firm closed its most recent flagship pool, Fund VIII, on $12 billion last year.

Overall, total deal volume in 2020 was estimated around $60 billion, versus a record high of $80 billion in 2019, according to Evercore’s full-year volume report. GP-led deals represented about 53 percent of the total deal volume last year (or around $32 billion), Evercore estimated.