Thomas H. Lee Partners Buys Time With Secondary Deal for Hightower
December 03 2020 - 6:10PM
Dow Jones News
By Laura Kreutzer
Thomas H. Lee Partners has bought itself more time to manage an
investment in wealth-advisory firm Hightower Advisors LLC through a
secondary transaction with investors that include Goldman Sachs
Group Inc.
The size of the deal ranges between $700 million and $800
million, according to a person familiar with the transaction who
did not provide any additional financial details.
The firm has recapitalized Chicago-based Hightower partly with
new capital from secondary specialist Coller Capital as well as the
secondary investment units of Neuberger Berman Group and Goldman
Sachs. THL, as the Boston firm is known, will remain Hightower's
lead investor and continue to manage the wealth adviser, according
to a press release.
Secondary investments involving a single company or asset
represent a small but growing part of the market for second-hand
private-equity stakes. In such deals a private-equity owner often
refinances a single asset using a new vehicle that typically
provides it with a fresh five- to seven-year investment term,
bringing in new capital from secondary buyers. The structures let
firms hold onto assets for longer periods than they might otherwise
be able to had the assets remained in the funds that originally
backed them.
Shea Goggin, a managing director at investment bank Houlihan
Lokey Inc., which advises firms on such deals, said there are
several other single-asset deals in the market that firms are
pitching to investors.
"We're seeing opportunities right, left and center," Mr. Goggin
said. "Whereas before the strategic alternatives for sellers would
be an IPO or straight sale, now this has become a more prevalent
and accepted option."
For its part, THL initially invested in Hightower in 2018 and
since then has steadily expanded the company. This year alone,
Hightower announced eight add-on acquisitions through last month,
on top of four such deals last year, according to the release. The
wealth adviser with offices in 33 states had $61.6 billion in
assets under management at the end of September, and $81.4 billion
in assets under administration.
The person familiar with the deal added that investors were able
to see how the company performed during the Covid-19 pandemic,
which boosted confidence that it would continue to perform
well.
Overall secondary investment activity, including single-asset
transactions, is rebounding in the fourth quarter after uncertainty
caused by the coronavirus pandemic dramatically slowed deal
activity in the first half of the year. Deal volume declined by
more than half to $18 billion during the first half of 2020,
compared with the same period last year, according to data from
intermediary Greenhill & Co.
"Now that you can see who has weathered the storm, the secondary
market is able to re-engage and price with more certainty," said
Justin Resnick, vice president on the secondary team at Houlihan
Lokey. "But [buyers] will be looking for deals with assets that
have proven their ability to perform through Covid and that still
have upside."
Write to Laura Kreutzer at laura.kreutzer@wsj.com
(END) Dow Jones Newswires
December 03, 2020 18:55 ET (23:55 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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