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TH Lee seeks more time to manage HighTower Advisors through single-asset secondary

GP-led deals like single-asset processes are beginning to flood the market as secondaries activity picks up after a sustained pause in the pandemic downturn. 

Thomas H. Lee Partners is seeking to raise between $400 million to $600 million to move its portfolio company HighTower Advisors out of an older fund for more time to manage the asset, two sources told Buyouts

The HighTower deal is one of a handful of so-called single-asset processes hitting the market as GPs look for more time to manage out certain investments. GP-led deals like single-asset processes are beginning to flood the market as secondaries activity picks up after a sustained pause in the pandemic downturn. 

“The expected sales times of portfolio companies are being pushed back one to two years,” said a secondaries market professional. “So it’s almost like covid-19 has really accelerated the development of the GP sponsored side of the market.”

TH Lee recapitalized HighTower in 2017, taking a significant stake in the registered investment adviser. At the time, TH Lee also committed to investing an additional $100 million in the company after closing, subject to certain approvals. 

The firm explored a potential sale of HighTower earlier this year, before markets shut down from the pandemic, Reuters reported in February. A person with knowledge of the situation denied that report, saying the firm never explored a sale for HighTower, nor is the firm considering a sale now.

TH Lee invested in HighTower out of Fund VII, which closed on $2.6 billion in 2016, a TH Lee spokesperson said. The firm last year pulled a fund restructuring process on its sixth fund, which closed on $8.1 billion in 2006, last year. However, the firm did eventually close a restructuring deal for Fund VI, a person with knowledge of the matter said, without providing further details. 

The single-asset deal would allow LPs in the fund that holds HighTower to either cash out of their exposure to the company or roll their interests into the continuation vehicle. Generally continuation pools come with three-to-five year terms.

Evercore is working as secondaries adviser on the transaction, the sources said. A spokesperson for TH Lee declined to comment further.

HighTower is one of several single-asset processes in the market as activity begins to ramp up in anticipation of publication of second-quarter performance marks. A focus on specific companies makes sense as GPs look for ways to manage investments through the downturn and provide capital to businesses that need it. 

Another single-asset deal that proceeded through the downturn was Providence Equity’s HSE24, a German home shopping television network. That deal is being led by Intermediate Capital Group, Buyouts sister publication Secondaries Investor reported in June.  

Single-asset deals accounted for 30 percent of GP-led transactions in the first half, up from 20 percent in 2019, according to first-half secondaries volume report from Evercore. GP-led deals were about 39 percent of an estimated $18 billion total deal volume in the first half, Evercore found.

Update: This story was updated to specify that TH Lee invested in HighTower from Fund VII. Also, the report was updated to include source insight that the firm eventually closed a restructuring process for Fund VI and that the firm never explored a sale of HighTower, denying an earlier Reuters report.