Stone-Goff Partners is working on a process for more time with its portfolio company JSI that will include a fresh investment from the firm’s new flagship that is currently in fundraising, sources told Buyouts.
The deal is among a plethora of single-asset processes GPs of all sizes are using to extend their holds over portfolio companies they feel have more growth ahead. Mid-market GP-led deals get less publicity than much larger processes, but this part of the secondaries market is busy.
Stone-Goff invested in JSI in 2018. The company provides regulatory and compliance consulting services to telecom providers in rural communities in the US.
The deal could total $125 million or more, one of the sources said. Sixpoint Partners is working as adviser on the deal.
The transaction allows LPs in the firm’s third fund, which closed in 2015, to cash out of their interests in JSI. Existing LPs also would have the option to reinvest in the company through the continuation fund, the terms of which have not been disclosed. Generally continuation funds come with their own set of terms like management fees and carried interest rates.
An interesting aspect of the deal is that Stone-Goff would invest in the continuation fund using capital from its fourth fund, which is in the market fundraising, according to a Form D fundraising document filed earlier this month.
Such cross-fund investments have been part of GP-led deals over the past few years, though they have not yet become widespread. Unlike cross-fund M&A transactions, GPs using capital from a new fund to back a continuation fund is looked upon favorably by both LPs and secondaries investors, sources have told Buyouts.
“When a GP is willing to roll their carry, write a new check and have the new fund participate, they’re saying, ‘We trust our entire brand with this asset,’” a secondaries market professional said in a prior interview. “The beauty of the continuation fund is that the new fund is not determining the price.” Valuation instead is set by an auction process (when the GP sells a minority stake in the asset before the secondaries process), or a third-party fair value opinion, the person said. “That helps to mitigate that conflict of interest that occurs if you just sell the asset to the new fund.”
Stone-Goff was formed in 2010 by Hannah Stone Craven and Laurens Goff. Stone Craven worked at Sandler Capital Management from 1993 to 2006, according to her LinkedIn profile, while Goff worked at Hampshire Equity Partners from 1998 to 2007, his profile said.
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