Whitehorse leads strip sale out of Carlyle’s debut mid-market fund

Whitehorse Liquidity Partners led a strip sale of investments out of Carlyle Group’s debut U.S. Equity Opportunities Fund that closed earlier this year, three sources told Buyouts

The total value of the deal was around $250 million, two of the sources said. 

It’s not clear which investments the strip sale included; the sale included between 10 to 15 investments from the fund, one of the sources said. In a strip sale, third-party investors directly buy investments out of an older fund. Carlyle will continue to manage the assets included in the sale, one of the sources said. 

Carlyle closed its debut middle-market on $1.1 billion in 2012. At the time, it had deployed about 20 percent of the fund in four investments: Philadelphia Energy Solutions; Dynamic Precision Group; Worldstrides; and Service King, Carlyle said at the time. 

The fund was generating a 1.5x multiple and a 9 percent net internal rate of return as of June 30, 2019, according to Carlyle’s second quarter earnings report. The fund appears to be fully deployed but only partially exited, according to the earnings report. 

Carlyle raised its second middle market fund in 2015 on $2.4 billion. The strategy targets investments in the U.S. and Canada requiring equity capital of $25 million to $200 million. 

Whitehorse, launched by ex-CPPIB secondaries executive Yann Robard in 2015, has been involved in a few big processes. The firm stepped up as the buyer alongside HarbourVest Partners in Sun Capital Partners‘ sale of existing LPs stakes in its sixth fund, known as a tender offer. 

The firm is raising its third fund, targeting $1.5 billion. It had raised at least $932.5 million as of April, according to a Form D fundraising document. 

Carlyle is one of several high-profile GPs that have used or are using the secondary market to sort out older funds. TPG, Warburg Pincus, Oaktree Capital Group, Bain Capital, Insight Venture Partners, Ares Management, Blackstone Group and Thomas H. Lee Partners have all turned to the secondary market to deal with older funds. 

GP-led deals have become a larger part of the overall secondary market, which produced an estimated $42 million of volume in the first half of this year. Evercore and Greenhill Cogent believe total secondary activity could tally more than $90 billion this year. 

Update: This story was updated to include a range of how many investments were included in the strip sale. 

Action Item: Check out Carlyle’s second quarter earnings report: https://bit.ly/2lM1UJm