K1 eyes Smarsh, other assets in big GP-led secondaries process

K1 Investment Management is running a broad process to move nine assets out of older funds and into a continuation pool for more time and capital to manage the investments, two sources told Buyouts.

As a multi-asset process, the K1 deal is garnering interest from the market, which is eager to expand beyond the concentrated single-asset bets that have been all the rage recently. GP-led deals like single-and multi-asset continuation funds have been driving the market since last year, with traditional LP portfolio sales following closely behind.

K1 is working with Evercore on the process. It could total $3 billion or more, sources said. Of the nine assets, the largest is software company Smarsh, which K1 acquired in 2016. Smarsh provides hosted services for archiving email, instant messaging and social media platforms.

The deal would give investors in older K1 funds the chance to either cash out of their interests in the assets, or roll or reinvest in the continuation fund. It’s not clear if existing investors have the ability to roll on the same terms they had in the original funds.

K1 closed its most recent pool, K5 Private Investors, last summer on more than $4.5 billion. The firm closed its 2018-vintage Fund IV on just over $2 billion.

The firm was formed in 2011 by a group out of Kayne Anderson Capital Advisors, led by CEO and principal owner Neil Malik. Malik formerly worked at Kayne Anderson and was a senior managing director who built the firm’s growth equity practice. The other founders are managing partners Hasan Askari and Taylor Beaupain.

K1 focuses on investments in B2B and enterprise software companies in the lower mid-market. Typically it invests in sectors like financial services, legal, healthcare and cybersecurity.

Last year, Smarsh added-on the Digital Safe archiving and risk management portfolio from Micro Focus, the company said in a statement in November.

Multi-asset deals have been less prevalent in the market of late, compared to the flood of single-asset deals that caught buyer attention. Single-asset deals continue to lead the pack among GP-led transactions, though buyers are hungry for more diversification after spending millions on concentrated bets.

Single-asset deals represented 48 percent of total GP-led volume in 2021, which tallied around $68 billion, according to Jefferies’ full-year volume report. Multi-asset continuation fund deals represented 36 percent of market volume in 2021. Total secondaries volume was estimated around $132 billion, Jefferies found.

Other GP-led processes in the market include KKR’s single-asset deal for Internet Brands, Warburg Pincus’s single-asset process for Duravant and Accel-KKR’s multi-asset process.