The New York private equity firm recently filed a Form D fundraising document for GPI Capital Equity Opportunities Fund II. It did not disclose a target. Jefferies, Oppenheimer & Co and Triago are the placement agents.
GPI closed a debut fund in 2017, securing $722 million. Paired with a co-investment sidecar backed by institutions, Fund I is expected to deploy as much as $1 billion by the end of its term, managing partners Khai Ha and Alex Migon told Buyouts.
GPI was founded in 2016 by Ha, Migon and William Royan, all ex-members of Ontario Teachers’ high-conviction equities, a non-control investor in private and public companies. Led by Royan, they oversaw a multi-billion-dollar portfolio and deals like Ontario Teachers’ 2013 investment in Hudson’s Bay Company’s $2.9 billion purchase of Saks.
Ha, Migon and Royan departed Ontario Teachers’ in 2015 to form their own PE business. The goal, Ha said, was “to build a brand around the strategy” developed at the pension system and “to take things to a new level.”
Originally, the idea was to set up a $1 billion fund sponsored by BTG Pactual, a Brazilian bank and one-time portfolio investment of Ontario Teachers’. When political pressures on BTG impeded the plan, the trio moved on to establish GPI.
Active minority investor
GPI makes non-control growth and structured equity investments in North American businesses in technology, consumer and industrial sectors. It targets companies with revenue of $100 million-plus and values of up to $5 billion, providing them with customized financing options that span the capital structure.
Ha and Migon refer to the strategy as “growth equity with downside protection.”
The firm writes checks of $50 million to $300 million per investment, including co-investment. Co-investment is an essential part of the approach, Migon said, “allowing GPI to do larger deals and LPs to get closer to the strategy.”
A key aspect of the strategy is sourcing growth-oriented opportunities with a tech-enabled theme, such as consumer finance, e-commerce and marketplaces. These are typically found in businesses “at a certain point in their trajectory,” Ha said. “They want to accelerate.”
Though a minority investor, GPI actively engages with management to help drive financial and operational improvements. This mostly happens through board representation and advisory agreements.
Fund I has made nine platform investments since 2017. Five have been fully or partially exited, some in headline-grabbing M&A deals.
They include PostMates, a food-delivery service provider that was heading for an initial public offering when GPI two years ago led its $225 million financing. In December, PostMates was acquired by Uber Technologies in an all-stock deal valued at $2.65 billion.
In addition, SoFi, an online personal finance platform, was backed by GPI in 2017 in a $500 million investment made alongside Silver Lake. SoFi last month merged with Chamath Palihapitiya’s blank-check vehicle, giving it a Nasdaq listing and $2.4 billion in proceeds.
Investments like PostMates and SoFi helped shine a light on GPI. Through them, Migon said, “we punched above our weight.”
Covid-19’s digital acceleration helped validate GPI’s strategy, Ha said. In a post-pandemic market, he expects to find “a large opportunity set” among owner-operators who “don’t want to sell the house,” preferring a minority partner. Another trend juicing deal flow is the growing number of companies looking “to stay private longer.”
Other GPI team members include managing director Philip Lo, who runs investor relations. He joined last year from Siris Capital.