KSL Capital Partners is exploring a potential secondaries process for its ski resort platform, Alterra Mountain Company, that would give the firm more runway to continue growing the asset, sources told Buyouts.
The Alterra single-asset deal is among a few that are making their way through the market this year. The dislocation spurred by runaway inflation and rising interest rates has made it harder to close secondaries deals as the gap between buyer and seller pricing expectations widens.
The KSL deal would give investors in an older fund the option to cash out of their stakes in Alterra, or reinvest into the company through the continuation fund. Morgan Stanley is working as adviser on the process. It’s not clear exactly which KSL fund holds Alterra, though it’s likely Fund IV or V.
A spokesperson for KSL declined to comment.
While the process is said to have a lead investor, Morgan Stanley also is running a process to make sure investors are getting the best price, according to an LP with knowledge of the deal. “It’s kind of in a go-shop period,” the LP said in October.
KSL, alongside Henry Crown & Co, began the creation of Alterra in 2017 when it acquired Intrawest, Mammoth Resorts and Deer Valley Resorts. KSL already owned Squaw Valley Alpine Meadows. Then, in 2018, the two firms combined 12 resorts in the US to form Alterra, according to a press release at the time.
The single-asset deal is one of the more popular forms of secondaries in the market. GPs, who will likely have to consider holding investments longer in the market decline, as M&A and exit activity slows, are considering continuation funds.
Such deals give sponsors an additional three to five years to hold an investment, through the continuation fund structure, as well as outside capital that allows the asset to continue growing through acquisitions.
While appetite for GP-led deals is high, the challenge right now is getting such deals to the finish line. Secondaries investors are being extremely careful in what they invest in, and investor consortia are tough to assemble.
Along with single-asset deals, GP appetite is growing for tender offer transactions, as a way to deliver liquidity to investors in older funds, and to boost fundraising on new pools. Some of the larger tenders in the market are being run by Carlyle Group, Sun Capital and Harvest Partners.
Deal volume in the third quarter was estimated at $20 billion to $25 billion, according to a Q3 update from PJT Park Hill. Of that, 56 percent was estimated to be in GP-led deals like single-asset secondaries.
In those deals, “over 90 percent of LPs elected for liquidity across PJT’s closed mandates over the past six months,” the update said.