LA Private Equity Firm Plans $1.5B Fund Launch
Leonard Green & Partners Pursues $1.5 Billion Fund for Single-Asset Continuation Vehicles
Leonard Green & Partners, a private equity firm headquartered in Los Angeles, is in the process of launching a new fund with the goal of raising $1.5 billion. This fund aims to invest in single-asset continuation vehicles and is currently engaging in discussions with potential anchor investors. The firm anticipates reaching a first close in the latter half of 2024, with the initiative being viewed as a natural extension of their business. To bolster this effort, the firm has enlisted the expertise of David Fox, formerly of Blackstone, and Garrett Hall, an alumnus of AlpInvest Partners.
Other notable players in the private equity sector, including Blackstone, Morgan Stanley, and Intermediate Capital Group Plc, have also ventured into similar single-asset GP-led continuation strategies.
Key Takeaways
- Leonard Green & Partners is targeting $1.5 billion for their inaugural general partner-led secondaries fund.
- The fund is focused on investing in single-asset continuation vehicles, specifically targeting profitable companies that hold dominance within their respective sectors.
- The recruitment of David Fox and Garrett Hall underlines the seriousness of the firm's commitment to this endeavor.
- Continued popularity of continuation vehicles is providing liquidity to investors while they await alternative exit opportunities.
- Leonard Green's "Sage" is set to rival analogous strategies at Blackstone, Morgan Stanley, and Intermediate Capital Group Plc.
Analysis
Rooted in the broader trend of private equity firms seeking liquidity through secondary markets, Leonard Green & Partners' plan to raise a $1.5 billion fund for single-asset continuation vehicles represents a strategic move. This move aligns with the firm's objective of offering exit options for existing investors while maintaining exposure to profitable, dominant companies. The addition of experienced professionals such as David Fox and Garrett Hall underscores Leonard Green's dedication to this strategy.
The success of this fund could potentially stimulate other firms to adopt a similar approach, leading to heightened competition and consolidation in the secondary market. The surge of continuation vehicles could have ramifications for limited partners, potentially altering the distribution of returns and liquidity options. Portfolio companies may experience increased access to growth capital and operational support as a result.
Over the long term, this development could shift the power dynamics within private equity, granting general partners more control over the exit process and asset lifecycle. The growth in continuation funds may trigger regulatory scrutiny as policymakers assess the impact on market transparency, competition, and investor protection.
Did You Know?
- Single-Asset Continuation Vehicles: These investment structures enable private equity firms to extend the lifespan of a single portfolio company beyond the typical duration of a private equity fund. By creating a new fund focused on a single asset, investors can continue to benefit from the company's growth without being constrained by the standard 10-12 year fund timeline.
- General Partner-Led Secondaries Fund: Refers to a private equity fund that acquires the stakes of existing limited partners in older funds through secondary market transactions. Leonard Green & Partners' debut fund will concentrate on purchasing stakes in single-asset continuation vehicles, allowing further investments in profitable, sector-dominant companies.
- Roles of David Fox and Garrett Hall: Both individuals bring substantial experience from their previous positions at Blackstone and AlpInvest Partners, respectively. In the context of this new fund, they will be responsible for sourcing and evaluating potential single-asset continuation vehicles, as well as overseeing the investment process and the ongoing performance of the portfolio companies.