Centre Partners, the mid-market focused shop, closed a deal that gives it more time and capital to grow two portfolio companies in a transaction that reached final close despite the overall challenging markets.
Centre Partners’ deal is the latest example of the ability of smaller, mid-market GP-led secondaries transactions to find their way successfully to final close. Several deals across the mid-market have closed recently and market professionals see continued vibrancy at this smaller level of secondaries.
By contrast, the largest side of the market has proven more challenging because of price discrepancy and the need to find wide investor syndicates to handle big price tags.
Centre Partners moved into a continuation fund portfolio companies IMA Group, which provides medical and psychological evaluation services, and Sun Orchard, which provides juices, smoothie bases and ingredients to the foodservice industry.
The deal, in the range of $300 million to $500 million, was led by New 2nd Capital, sources told Buyouts.
Moelis & Co worked as secondaries adviser on the transaction. As is normal in such deals, existing LPs had the option to sell their stakes in the companies or roll into the continuation fund. A higher proportion of LPs in this deal chose to stick with the assets, rather than cash out, one of the sources said.
The terms of the continuation fund were not clear, nor was the extent of the GP’s contribution to the pool. Buyers in today’s market like to see a GP rolling 100 percent of its carried interest into the deal, along with a shot of fresh capital from a new fund.
“There was strong sponsor alignment around the go-forward case for the businesses,” the source said.
Centre invested in Sun Orchard in 2014 (though announced in early 2015), and in IMA Group in 2018. It’s not clear which funds held the investments, though it appears to include Centre’s Fund VI. A source said the assets were held across two of Centre’s funds.
A spokesperson for Centre Partners declined to comment. Centre was formed in 1986 and managed about $1.1 billion as of December 2022, according to the firm’s Form ADV. The principal owners of the management company are managing partner Bruce Pollack and senior partner David Jaffe, the ADV said.
Centre is among a group of GP-led deals in the mid-market that have recently reached final close. Others include Presidio Investors’ continuation fund deal for Elevate Semiconductor, and Saw Mill Capital, which moved two assets – Climate Pros and Industrial Refrigeration Pros, into a continuation pool.
GP-led deals tallied around $52 billion out of total volume of $108 billion last year, according to Jefferies’ full-year 2022 secondaries report. Single-asset deals represented around 50 percent of completed GP-led volume, the report said.