Editor’s Note: The below article is a revised version of the HarbourVest awards profile included in the February edition of EVCJ. The original version included some confidential information that was removed at the request of HarbourVest. EVCJ apologises for any inconvenience caused.
HarbourVest Partners has been a pioneer in the global secondary market and remains a leading innovator of secondary transaction types and deal structures.
HarbourVest completed its first secondary investment in 1986, its first synthetic secondary transaction in 1995, and has closed multiple industry-leading transactions.
To date HarbourVest has committed over US$6.2bn to all types of secondary opportunities on a global basis.
HarbourVest seeks to generate outperformance by thorough due diligence, identifying hidden value, exit timing, purchase price optimisation, and innovative transaction structuring. The group also adds value post investment through active roles on advisory boards.
As a testament to HarbourVest’s track record over the years, its seventh generation secondaries fund (Dover Street VII) was significantly oversubscribed with a final close (in Q1 of 2009) at over US$2.9bn, compared to its original target of US$2bn. This further anchored the firm’s position as one of the largest players in the secondary market and provided the group with a substantial amount of dry powder to take advantage of the attractive secondary investment environment expected in the coming years.
HarbourVest’s network of longstanding individual and institutional relationships with general partners, limited partners, entrepreneurs, intermediaries, and peers is a strong source of dealflow and market intelligence which generated approximately US$46bn of secondary dealflow through the first three quarters of 2009.
The firm’s broad experience was honed over multiple economic and private equity cycles, which prepared it well to face the turbulent markets of 2009.
In 2009, HarbourVest focused on transactions with a proprietary angle and favourable transaction dynamics, while developing specialised structures in order to address specific seller needs and bridge the gap between buyer and seller. Furthermore, the firm’s ability to complete in-depth diligence on a wide array of assets and its expertise in execution allowed it to address complex transactions and to selectively deploy capital. In that environment, HarbourVest has remained extremely disciplined and true to its investment guidelines and strategy. As such, HarbourVest has committed approximately US$215m to secondary transactions in 2009.
In September 2009, HarbourVest co-led a £170m transaction involving the purchase of venture assets held by 3i. It partnered with Coller Capital and an established venture manager, DFJ Esprit, to manage the portfolio going forward.
DFJ Esprit was a natural partner for HarbourVest given its strong and longstanding investing relationship. Specifically, in 2007 HarbourVest purchased the cornerstone investment of the group’s former parent in its first fund, in a transaction that completed the team’s move to full independence.
Furthermore, DFJ Esprit’s familiarity with the portfolio companies and seller were unmatched by any other experienced GP team.
In addition, DFJ Esprit’s managed funds were co-investors in some of 3i’s portfolio companies and the team had evaluated potential investments in a number of the companies that had fund raised in the last couple of years. Following this transaction, three of 3i’s key investment professionals responsible for managing the majority of the value drivers joined DFJ Esprit, ensuring continuity in the management of the portfolio.
The combined portfolio included almost 30 assets, and the dataroom included 18,300 pages of documents to be analysed. The firm met with management teams of more than half of the portfolio companies in less than eight weeks.
In April 2009, HarbourVest worked with Paul Capital, AIG PineStar Capital, Access Capital Partners and SVB Financial Group to orchestrate a €150m secondary transaction involving the purchase of Merrill Lynch/Bank of America’s position in a fund managed by Kreos Capital, a Pan-European venture debt provider with offices in London, Stockholm and Tel Aviv.
Kreos is among the most experienced players in the venture debt market, having completed over 250 transactions over the last 11 years. At the time, the underlying portfolio consisted of debt investments in over 80 companies (and growing) and nearly all of the investments represent the most senior security in the underlying businesses.
Using prior experience in the venture debt markets through both existing primary investments and secondary investments, HarbourVest was able to provide valuable insight into evaluating the investment opportunity. Furthermore, the company’s relationship with Kreos and familiarity with many of the underlying portfolio company investments through its existing European venture portfolio also enabled HarbourVest to offer a compelling solution to Merrill Lynch/Bank of America.
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SNAPSHOT:
Headquarters: Boston, US
Founded: 1982
Other offices: London, UK; Hong Kong
Investment professionals: 82
Assets Under Management: US$18bn
Business: Makes private equity investments in three areas—primary partnerships, secondary interests in partnerships and portfolios, and direct investments in operating companies. Invests in venture, buyout, mezzanine and distressed debt funds in the US, Europe and Asia.
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WHY THE FIRM WON:
• Raised almost US$3bn for its seventh secondaries fund.
• Invested US$215m in secondary deals in 2009.
• Developed specialized structures to address gap between buyer and seller.
• Co-led the £170m deal with Coller Capital and involving DFJ Esprit for venture assets held by 3i.
• Played a key role in the €150m secondary transaction involving the purchase of Merrill Lynch/Bank of America’s position in a fund managed by Kreos Capital, a venture debt provider, by Paul Capital, AIG PineStar Capital, Access Capital Partners and SVB Financial Group.
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Shortlist
HarbourVest Partners
Pantheon Ventures
F&C Asset Management
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