Milestone seeks to use secondary process to set direction of firm

Milestone Partners is working on a process to move out specialty finance assets from older funds into a new pool that will set the direction for the firm moving forward, sources told Buyouts.

The Radnor, Pennsylvania, firm has been working on a secondary process of its third and fourth funds since earlier this year. Park Hill Group is secondary adviser.

The deal would enable current limited partners in the third and fourth funds to sell out of their stakes in the assets or roll their interests into the continuation vehicle, sources said.

Buyers are exploring the deal, which could come at a total value of around $400 million, one source said. This includes the value of the assets and co-investment stakes in the assets, sources said.

Going forward, Milestone would shift its primary focus to specialty finance investments, sources said. Milestone, formed in 1995, invests in tech-enabled services, software, financial services and tech-driven manufacturing.

“The rationale was a lot more around the pivoting to focus on specialty finance,” one of the sources said. “There’s definitely multiple buyers looking at it.” Buyers are assessing the assets and negotiating pricing, the source said.

Milestone has been in the market with its fifth fund, according to a Form D filed in January 2018. The fundraising has been challenged, sources said, which spurred Milestone to explore secondary options.

Managing Partners Scott Warren and John Shoemaker did not respond to a request for comment. Julia Sottosanti, spokeswoman for Park Hill, declined comment.

The firm raised $300 million for Fund IV in 2013, $240 million for Fund III in 2009, and $120 million for Fund II in 2004.

Fund III has been challenged, generating a 0.28 percent internal rate of return and a 1.01x multiple as of Dec. 31, 2017, Pennsylvania Public School Employees’ Retirement System data showed.

Fund IV, a better performer, was producing a 13.23 percent IRR and a 1.57x multiple, according to Pennsylvania PSERS.

Milestone’s GP-led process is one of several in the market this year. Energy & Minerals Group is working on a process that could total $5 billion, targeting several midstream assets from older funds and moving them into a new fund.

Accel-KKR is considering bringing a secondary process on its third fund this spring, Buyouts previously reported.

Action Item: Check out Milestone’s Form ADV: https://bit.ly/2RioqIG