HarbourVest Mum on Rumored $1B Deal

Boston-based HarbourVest Partners announced the promotion of 11 investment professionals in its primary and secondary investment teams as the private equity firm is seeing an increase in secondary deal flow this year. Meanwhile, reports are circulating that the firm is poised to close a large secondary deal potentially valued at up to $1 billion.

HarbourVest announced that 11 of its 51 investment professionals have received promotions. Five of the 11 investment professionals promoted are members or work with the secondary partnership group. Among the secondary investment professionals, Brett Gordon was promoted to principal; Brian Buenneke, John Fiato and Jeffrey Keay were made senior associates and Corentin du Roy, who also works on the primary investment team, was made an associate. The firm also promoted several primary investment professionals.

Managing Director John Begg says that HarbourVest is promoting the members of the secondary team as a reward for hard work in the face of significantly increased deal flow this year. HarbourVest has evaluated over $10 billion worth of secondary assets in the first nine months of 2003. This is up considerably from last year, which saw the team evaluate a total of more than $9 billion in all of 2002. HarbourVest has already been able to close on over $500 million in secondary deals.

“We realized that sellers were becoming more realistic compared to the reluctance we met with last year,” says Begg. “We definitely believe that as the deal flow was increasing and we were becoming more creative with the structures we were putting into place that there was a definite opportunity for us, so we wanted to make sure we rewarded the associates appropriately.”

He adds that with a staff of primary, secondary and direct investment professionals, the secondary partnership team is able to use the primary and direct staff as a resource when considering deals, particularly those involving portfolios of venture investments. If the deal necessitates it, all 51 of the firm’s investment professionals can be put toward one transaction, according to Begg.

Begg added that HarbourVest intends to recruit a few more people over the next six to nine months.

And the firm may need them. Press reports indicate that HarbourVest is nearing a history making $1 billion secondary purchase of UBS Capital private equity assets. The deal would be for interests in about 60 funds that UBS Capital’s private equity group invested in between 1990 and 2001.

The Swiss investment-banking firm has taken heavy losses in its private equity investments. UBS announced last year that it was reducing its exposure to private equity. It recorded heavy losses in and out of its private equity portfolio.

Neither Begg nor anyone else at HarbourVest would comment on the reports of the deal. Begg said that the promotions were not related in any way to the reports. UBS also declined to comment.

With the recent influx of cash into large secondary funds creating record-breaking fund sizes for secondaries, it follows that the market would be poised for record-breaking transactions.

If the deal materializes, it would be the second-largest secondary deal ever, behind Deutsche Bank’s sale of $1.5 billion of private equity investments in the deal that created MidOcean Partners (PE Week, March 3, 2003). HarbourVest committed $160 million to that transaction. HarbourVest has $3 billion reserved for secondary deals, according to secondary advisory firm Columbia Capital.

Last month, the London Pensions Fund Authority (LPFA) announced that it is investing about $212 million into three private equity funds, including $102 million in HarbourVest and $68 million into Pantheon Ventures, which is also heavily involved in secondary deals.

Earlier this year, HarbourVest closed its Dover Street V fund, a dedicated secondary fund, with $515.2 million. HarbourVest, which has offices in London and Hong Kong, has since its founding invested $1.7 billion in secondary deals, $8.4 billion in private equity funds and $2 billion in direct investments.