Novalpina LPs work through transition issues with preferred replacement manager BRG

Novalpina, an emerging manager whose partnership is breaking apart, is working to turn over control of the portfolio to replacement manager Berkeley Research Group, which is the GP-elect, two sources told Buyouts.

LPs have mostly signed on to name BRG the replacement manager, one of the sources said.

Remaining issues before final transition involve management of the underlying portfolio, which consists of three investments, which includes controversial spyware maker NSO Group.

Other issues that could take some time to work through include valuing the assets and distributions, as the existing manager has rights to proceeds from the investments, the source said.

“The size of those distributions depend on accrued value to all LPs,” the source said.

Negotiations are proceeding on “friendly” terms, the source said. The hope is that the transition remains amiable and smooth, in which case the existing GP will retain economic rights.

London-based Novalpina closed its debut fund on €1 billion in 2019, attracting LP attention because of the pedigree of the partners: Stephen Peel, former head of Europe at TPG; Bastien Lueken, who previously worked at Platinum Equity from 2011 to 2017, and before that at TPG; and Stefan Kowski, who worked at Centerbridge Partners from 2014 to 2017, and prior to that at TPG.

LPs overwhelmingly approved removing the GP in July after months of strife among the partners over issues of investment competence and the future structure of the firm. Removing the GP was the first step in what is considered a “no-fault divorce” proceeding. The next step was to either replace the existing manager, or simply allow the portfolio to liquidate.

Novalpina LPs would like to replace Novalpina’s founders to allow a new GP to manage out the assets, rather than simply liquidate in a fire sale, sources have told Buyouts. The fund has performed well, sources said.

Novalpina Capital Fund I was generating a 1.48x total value to paid-in multiple as of December 2020, according to performance information from the Oregon Public Employees Retirement Fund.

The deadline to decide whether to replace or liquidate was set for August 6, but LPs approved a two-week extension to continue working toward a cooperative transition with the former GP. “There’s lots to do for change to be smooth,” a source told Buyouts earlier this month.