One common characteristic of GP-led continuation fund deals is that the firms involved are well established. And generally the funds involved are fairly mature, at least by private equity standards.
But one deal in the market turns that general characteristic on its head. Nexus Capital Management, a firm formed in 2013 by ex-Apollo executives, is running a continuation fund deal on two assets from its second fund, which closed on $550 million in 2018.
Nexus’s fund is young compared to most GP-led deals, though some recent transactions have involved younger assets in what appears to be something of an expansion of the scope of the strategy. And the firm itself is young compared with many of the other shops that have engaged in secondaries activity, such as Blackstone Group, TPG and General Atlantic.
The deal highlights the versatility of secondaries, in that no single template necessarily defines the opportunity set. It’s a model that is constantly evolving as GPs get creative on how they can extend their holds over treasured assets while finding ways to pay back existing investors and inject fresh capital into the businesses to allow them to grow.
Nexus’s transaction, which is being advised by Credit Suisse, involves flower delivery service FTD and education products company Savvas Learning Co. The combined equity value of both companies is about $950 million, two sources told Buyouts.
The process allows Fund II LPs to either cash out of their stakes in the assets, or roll their interests into the continuation fund, on a status quo basis, one of the sources said. This means existing LPs can roll their interests into the continuation fund with no change to their terms, other than agreeing to the time frame of the continuation fund.
“They’re saying, ‘we think these are great companies in good industries [that are] highly cash generative, we don’t want to sell today and exit, but we understand some LPs might want liquidity,’” the source said.
Neuberger Berman and Goldman Sachs Asset Management are co-leading the deal, sources said. It’s not clear how many other buyers are involved. The deal has been in the market since at least last year, one of the sources said.
Nexus closed its acquisition of FTD in 2019, making it a shorter hold than most assets in other GP-led deals. It acquired Pearson’s K-12 US textbook unit in 2019 for $250 million, Reuters reported at the time. Nexus renamed the unit Savvas Learning Co.
The firm is owned by Damian Giangiacomo and Michael Cohen. Nexus Capital focuses on distressed, special situations and private equity investments in mid-market companies with capital structures between $300 million and $1 billion.
Nexus Capital targets industrials, consumer (including retail and food) and building products and education, according to Nexus Capital’s Form ADV. Nexus closed its most recent pool, Special Situations Fund III, on $1.25 billion last year.
No one from Nexus returned a comment request Wednesday. A spokesperson for Credit Suisse declined to comment.
Nexus’s GP-led deal is one of numerous ones driving the secondaries markets toward record activity levels. Volume in the first half was estimated at around $48 billion, up 163 percent from the same period in 2020, according to Evercore’s half-year volume report. GP-led deals, like Nexus’s process, accounted for around 60 percent of total volume, the report said.
Deals involving single assets represented around 25 percent of volume, the report found.