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Leonard Green completes one of the largest-ever GP-led secondaries deals

The deal is one of the high-profile secondaries in the market this year helping to push activity volumes that some expect to reach record highs by year-end.

Leonard Green completed a process to move assets out of its 2007 fund for more time and capital to manage the investments that ended up totaling around $2.5 billion, making it one of the largest-ever such deals.

Nordic Capital’s 2018 GP-led deal, in which it moved nine assets from its 2008 fund into a €2.5 billion ($2.9 billion) continuation pool, has been widely considered the largest-ever such transaction.

The deal is one of the high-profile secondaries in the market this year helping to push activity volumes that some expect to reach record highs by year-end. Other large deals include processes run by New Mountain Capital (which is being renegotiated), Kohlberg & Co. and General Atlantic.

AlpInvest Partners and HarbourVest Partners led the Leonard Green deal that allowed investors in Leonard Green’s fifth fund to either sell their stakes in the pool or roll their interests into the continuation vehicle. Two other buyers were involved in the deal, and the group of four underwrote the entire transaction, a person with knowledge of the deal said.

The deal’s total included capital for follow-on investments, two sources with knowledge of the deal said.

For existing Fund V LPs who wanted to cash out, pricing was set to a slight premium to net asset value as of Sept. 30, 2020, Buyouts previously reported. Evercore worked as secondaries advisor on the deal.

Such large, complex GP-led secondaries deals take time to complete, which can lead to some of the assets transacting in other ways. During the Leonard Green process, which kicked off late last year, two of the companies involved in the secondary went public, while remaining part of the transaction.

Joann Inc. filed to go public in February intending to sell shares in a range from $15 to $17, but fell short of that goal. In March, the company sold 11 million shares for $12 each, according to a Bloomberg report. The firm acquired the company in 2010 in a $1.6 billion deal, according to a Reuters report at the time.

As well, Fund V portfolio company AerSale, which provides aviation aftermarket products, went public in December in a transaction involving special purpose acquisition company Monocle Acquisition Corp, the company said in a statement. Leonard Green invested in AerSale in 2010.

Along with Joann and AerSale, the secondary included Authentic Brands Group and CHG Healthcare Services, the person said.

Leonard Green was formed in 1989 and is focused primarily on service industries in the consumer, business and healthcare, and retail sectors. The firm closed its most recent flagship pool, Fund VIII, on $12 billion in 2019.

Overall, total deal volume in 2020 was estimated around $60 billion, versus a record high of $80 billion in 2019, according to Evercore’s full-year volume report. GP-led deals represented about 53 percent of the total deal volume last year (or around $32 billion), Evercore estimated.