With some large deals under its belt, investment bank Vision Capital sees a bright future of secondary deals, at least on the buyout side. The London-based firm announced it acquired the investment portfolio of CS Structured Credit Fund. The deal is a secondary buyout deal for a direct portfolio of companies, a kind of deal that Vision and others call “synthetic secondaries.”
The portfolio consists of five investments for controlling stakes in pub and tavern operator Avebury Taverns and Elegant Hotels Group, and interests in consumer debt firm Cabot Financial, highway rest area company RoadChef and finance company Resource Partners Group. CS Structured Credit Fund is managed by Cabot Square Capital. Last year, Londonbased Cabot Square closed on more than $322 million for its second fund, CS Capital Partners II.
The companies in the portfolio are being acquired by an investment partnership of $189 million. Goldman Sachs’ GS Vintage Funds and Landmark Partners are lead investors in the partnership, which includes other unnamed investors. Goldman Sachs Asset Management’s Private Equity Group have closed a number of direct portfolio transactions, and is reported to be working on raising a new secondary fund of its own (see next story).
“Synthetic secondaries” allow primary fund investors to exit from an entire portfolio in a single transaction. Traditional secondary transactions involve secondary buyers obtaining interests in a portion of a private equity fund and do not involve holding direct interests in portfolio companies. Secondary buyouts usually involve a single company transaction between two or more firms acting as buyer or seller rather than the interests of several companies changing hands.
While this was the first time Landmark had participated, it was this partnership with Goldman Sachs formed last year that enabled Vision to buy a portfolio of companies from Morgan Grenfell Equity Partners (MGEP) funds. The portfolio represented the majority of MGEP’s investments. GS Vintage Funds II invested along with Vision to make the deal, which included interests in packaging manufacturer AB Cergo Group, grinding wheel maker Abrasive Technologies Holding, manufacturing and chemical supplier Deloro Stellite Group and Shearings Group, a U.K. travel agency.
Vision Capital was founded in 1997 by former Smith Barney European investment banking executive Julian Mash. The firm has closed on or advised more than 20 transactions, with 10 of those transactions involving private equity firms and private equity portfolio companies. The 11-person investment team focuses on European investments in the form of “synthetic secondaries” and advisory services.